2010 Annual Report

Transcription

2010 Annual Report

2010 Annual Report
The Best Emotions, Digitally
Annual Report
The Annual Report in English is a translation of the French “Document de référence” for information
purposes. This translation is qualified in its entirety by reference to the “Document de référence”.
Key Figures - Simplified Organization Chart
04
Description of the Group and its Businesses – Litigation – Risk Factors
12
1.
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
1.7
2.
2.1.
2.2.
2.3.
2.4.
2.5.
2.6.
2.7.
3.
4.
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20
23
27
27
28
28
30
33
39
44
48
54
56
62
Description of the Group
Strategy
Highlights
Financial Communication Policy and Value Creation
Sustainable Development Policy
Human Resources
Insurance
Investments
Description of the Group’s Businesses
Activision Blizzard
Universal Music Group
SFR
Maroc Telecom Group
GVT
Canal+ Group
Other Operations
Litigation
Risk factors
Information about the Company – Corporate Governance
66
1.
2.
3.
4.
68
68
82
5.
General Information about the Company
Additional Information about the Company
Corporate Governance
Report by the Chairman of the Vivendi Supervisory Board on Corporate Governance, Internal Audits
and Risk Management – Fiscal Year Ended December 31, 2010
Statutory Auditors’ Report, prepared in accordance with Article L.225-235 of the French Commercial Code,
on the Report Prepared by the Chairman of the Supervisory Board of Vivendi S.A.
116
124
Financial Report – Consolidated Financial Statements –
Statutory Auditors’ report on the Consolidated Financial Statements –
Statutory Financial Statements
126
Selected key consolidated financial data
I.
2010 Financial Report
Summary of the 2010, 2009 and 2008 main developments
1.
Major developments
2.
Earnings analysis
3.
Cash flow from operations analysis
4.
Business segment performance analysis
5.
Treasury and capital resources
6.
Forward looking statements
7.
Disclaimer
130
131
135
138
140
154
159
159
II.
Appendix to Financial Report: Unaudited supplementary financial data
160
III.
Consolidated Financial Statements for the year ended December 31, 2010
Statutory Auditors’ report on the Consolidated Financial Statements
Consolidated Statement of Earnings
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statements of Changes in Equity
Notes to the Consolidated Financial Statements
165
165
166
167
168
169
170
172
IV.
1.
2.
3.
4.
Vivendi SA 2010 Statutory Financial Statements
Statutory Auditors’ Report on the Financial Statements
Notes to the 2010 Statutory Financial Statements
Subsidiaries and Affiliates
Maturity of Trade Accounts Payable
Financial Results of the Last Five Years
Statutory Auditor’s Report on related party Agreements and Commitments
272
272
274
278
300
302
302
303
Recent events – Outlook
128
306
Recent events
Outlook
Statutory Auditors’ report on the ANI forecast
308
308
309
Independent Auditors Responsible for Auditing the Financial Statements
310
Independent Auditors Responsible for Auditing the Financial Statements
1.1. Statutory Auditors
1.2. Alternative Statutory Auditors
312
312
312
Key Figures 2010
Revenues by Business Segment
Revenues by Geographical Zone
EBITA by Business Segment
Earnings Attributable to Vivendi Shareowners
and Adjusted Net Income
Adjusted Net Income per Share and Dividend per Share
Financial Net Debt and Equity
Headcount by Business Segment
Headcount by Geographical Zone
Simplified Organization Chart
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6
7
7
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8
9
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Key Figures – Simplified Organization Chart
6
Vivendi 2010 Annual Report
Revenues by Business Segment
December 31 – in millions of euros
2010
2009
2008
0
5,000
10,000
Activision Blizzard (1)
SFR (2)
Maroc Telecom Group (3)
GVT (4)
Canal+ Group
Non-core operations and others,
and elimination of intersegment transactions
Total
1.
2.
3.
4.
15,000
20,000
25,000
2010
3,330
4,449
12,577
2,835
1,029
4,712
2009
3,038
4,363
12,425
2,694
104
4,553
2008
2,091
4,650
11,553
2,601
–
4,554
(54)
28,878
(45)
27,132
(57)
25,392
30,000
Includes Activision, consolidated since July 10, 2008.
Includes Neuf Cegetel, consolidated since April 15, 2008.
Includes Sotelma, consolidated since August 1, 2009.
GVT has been consolidated since November 13, 2009.
Revenues by Geographical Zone
2010
France
Rest of Europe
USA
Morocco
Brazil (1)
Rest of the World
Total
1. Mainly includes GVT’s Revenues, consolidated since November 13, 2009.
2009
2010
17,097
3,061
3,375
2,296
1,084
1,965
28,878
2008
2009
16,898
3,046
3,153
2,248
147
1,640
27,132
2008
15,967
2,766
2,889
2,221
–
1,549
25,392
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Vivendi Key Figures
EBITA by Business Segment
2010
2009
2008
0
1,000
2,000
3,000
2010
692
471
2,472
1,284
277
690
(127)
(33)
5,726
SFR (2)
GVT (4)
Canal+ Group
Holding & Corporate
Non-core and others
Total
4,000
2009
484
580
2,530
1,244
20
652
(91)
(29)
5,390
5,000
6,000
2008
34
686
2,542
1,224
–
568
(60)
(41)
4,953
Vivendi considers EBITA, a non-GAAP measure, to be the measure of its operating segments performance as reported in the segment data.
The method used in calculating EBITA excludes the accounting impact of the amortization of intangible assets acquired through business
combinations. This enables Vivendi to measure and compare the operating performance of operating segments regardless of whether their
performance is driven by the operating segment’s organic growth or acquisitions.
1.
2.
3.
4.
Earnings Attributable to Vivendi Shareowners and Adjusted Net Income
2010
2009
2008
0
Earnings attributable to Vivendi Shareowners
Adjusted Net Income
1,000
2,000
2010
2,198
2,698
2009
830
2,585
3,000
2008
2,603
2,735
Vivendi considers Adjusted Net Income, a non-GAAP measure, to be a relevant indicator of the Group’s operating and financial performance. Vivendi’s management uses
Adjusted Net Income as it better illustrates of the performance of continuing operations excluding most non-recurring and non-operating items.
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Adjusted Net Income per Share and Dividend per Share
December 31 – in euros
2010
2009
2008
0
0.5
1.0
1.5
2010
2.19
1.40
Adjusted Net Income per share
Divivend per share for fiscal year
2.0
2009
2.15
1.40
2.5
2008
2.34
1.40
Financial Net Debt and Equity
2010
2009
2008
0
Financial Debt
Equity
5,000
10,000
15,000
2010
8,073
28,173
20,000
2009
9,566
25,988
25,000
30,000
2008
8,349
26,626
Vivendi considers Financial Net Debt, a non-GAAP measure, to be an important indicator in measuring Vivendi’s indebtedness. As of December 31, 2009, Vivendi changed
the definition of Financial Net Debt to include certain cash management financial assets the characteristics of which do not strictly comply with the definition of cash
equivalents as defined by the Recommendation of the AMF and IAS 7. In particular, such financial assets may have a maturity of up to 12 months. Considering that no
investment in such assets was made prior to 2009, the retroactive application of this change of presentation has no impact on Financial Net Debt for the relevant periods.
Financial Net Debt is calculated as the sum of long-term and short-term borrowings and other long-term and short-term financial liabilities as reported on the Consolidated
Statement of Financial Position, less cash and cash equivalents as reported on the Consolidated Statement of Financial Position as well as derivative financial instruments
in assets and cash deposits backing borrowings (included in the Consolidated Statement of Financial Position under “financial assets”) as well as, from this point forward,
certain cash management financial assets.
Financial Net Debt should be considered in addition to, not as a substitute for, Vivendi’s borrowings and other financial liabilities and cash and cash equivalents reported on
the Consolidated Statement of Financial Position, as well as other measures of indebtedness reported in accordance with GAAP. Vivendi Management uses Financial Net
Debt for reporting and planning purposes, as well as to comply with certain debt covenants of Vivendi.
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Vivendi Key Figures
Headcount by Business Segment
December 31
2010
2009
2008
0
5,500
11,000
16,500
SFR (2)
GVT (4)
Canal+ Group
Corporate
Others
Total
1.
2.
3.
4.
22,000
2010
7,695
6,967
10,021
13,942
7,714
4,534
249
150
51,272
27,500
33,000
2009
7,382
7,524
9,945
14,152
5,289
4,347
254
111
49,004
38,500
44,000
49,500
2008
7,408
7,720
10,086
13,411
–
4,252
250
81
43,208
Headcount by Geographical Zone
December 31
2010
France
North America
South and Central America
Asia-Pacific
Africa
Europe (excluding France)
Total
2009
2010
15,447
7,419
8,051
1,609
14,127
4,619
51,272
2008
2009
15,360
7,649
5,654
1,455
14,328
4,558
49,004
2008
15,717
7,520
405
1,459
13,583
4,524
43,208
55,000
10
Simplified Organisation Chart
Percentage of voting interest held by Vivendi as of December 31, 2010 (unless otherwise specified).
Activision Blizzard
(1) (4)
61%
Universal Music
Group
100%
Universal Music
Publishing Group
100%
SFR
56%
Maroc Telecom
(1)
53%
GVT
(2)
100%
Canal+ Group
100%
Mauritel
51%
NBC Universal
(3)
12.34%
Canal+ France
(5)
80%
Onatel
51%
StudioCanal
100%
Canal+ SA
(1)
49%
Gabon Télécom
51%
Cyfra+
75%
Multi Thématiques
SAS
100%
Sotelma
51%
Vietnam
49%
Canal+ Distribution
SAS
100%
i>Télé
100%
Canal+ Overseas
SAS
100%
Canal+ Régie
100%
1. Listed Company.
2. On June 11, 2010, Vivendi obtained a 100% controlling interest in GVT*.
3. On September 26, 2010, Vivendi sold a 7.66% interest in NBC Universal to General Electric, and on
January 25, 2011, Vivendi sold the remaining 12.34% interest in NBC Universal*.
4. Ownership interest as of December 31, 2010*.
5. The IPO process relating to Lagardère’s 20% interest in is progress*.
* For more information on these transactions, please refer to Chapter 4, Financial Report, Section 1.1.
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This Page Intentionally Left Blank.
Section 1
Description of the Group
14
1.1.
1.2.
1.2.1.
1.2.2.
1.3.
1.3.1.
1.3.2.
1.3.3.
1.4.
1.4.1.
1.4.2.
1.4.3.
1.4.4.
1.5.
1.5.1.
1.5.2.
1.5.3.
1.5.4.
1.6.
1.7.
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Strategy
Highlights
2010 Highlights
2011 Highlights
Financial Communication Policy and Value Creation
Investment Policy
Financial Communications Policy
Value Creation in 2010
Sustainable Development Policy
Principal Sustainable Development Issues
Vivendi’s Specific Issues
Implementation of Sustainable Development Policy
The “Create Joy” Solidarity Program
Human Resources
Employee Share Ownership and Employee Savings Plans
Dialog between Management and Labor
Contribution to Employment Development
Equality of Opportunity in Educational Programs
Insurance
Investments
Section 2
Description of the Group’s Businesses
28
2.1.
2.1.1.
2.1.2.
2.1.3.
2.1.4.
2.1.5.
2.1.6.
2.1.7.
2.1.8.
2.2.
2.2.1.
2.2.2.
2.2.3.
2.2.4.
2.2.5.
2.2.6.
2.2.7.
2.2.8.
2.2.9.
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Activision Blizzard
Activision Publishing Product Highlights
Blizzard Entertainment Product Highlights
Seasonality
Regulatory Environment
Piracy
Competition
Raw Materials
Research and Development
Recorded Music
Music Publishing
Merchandising
Seasonality
Regulatory Environment
Piracy
Competition
Raw Materials
Research and Development
2.3. SFR
2.3.1. Performance and Services
2.3.2. Network
2.3.3. Seasonality
2.3.4. Responsibility, Commitment
2.3.5. Regulatory Environment
2.3.6. Piracy
2.3.7. Competition
2.3.8. Raw Materials
2.3.9. Research and Development
2.4. Maroc Telecom Group
2.4.1. Mobile Telephony
2.4.2. Fixed-line Telephony, Data and Internet
2.4.3. Distribution
2.4.4. Network
2.4.5. Mauritel
2.4.6. Onatel
2.4.7. Gabon Télécom
2.4.8. Sotelma
2.4.9. Seasonality
2.4.11. Competition
2.5. GVT
2.5.1. Products and services
2.5.2. Retail/Small and Medium Enterprise (SME) Segment
2.5.3. Corporate Segment
2.5.4. Network
2.5.5. Seasonality
2.5.7. Competition
2.6. Canal+ Group
2.6.1. Pay-TV in France
2.6.2. Film Production and Distribution Operations
2.6.3. Other Businesses
2.6.4. Seasonality
2.6.6. Piracy
2.6.7. Competition
2.7. Other Operations
2.7.1. NBC Universal
2.7.2. Vivendi Mobile Entertainment
2.7.3. Digitick
2.7.4. Wengo
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54
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55
Section 3
Litigation
56
Section 4
Risk Factors
Legal risks
Risks Associated with the Group’s Operations
Industrial Risks or Risks Associated with the Environment
Risks Associated with the Current Economic and Financial
Situation
Market risks
62
62
62
64
64
64
Description of the Group and its Businesses –
Litigation – Risk Factors
14
Section 1 Description of the Group
Vivendi is at the heart of the worlds of content, platforms and interactive networks. It creates, publishes, assembles and distributes high-quality digital
content, aimed at consumers and businesses. It controls the technology, infrastructure, marketing tools and commercial networks in the entire value chain.
Vivendi is the worldwide leader in video games (Activision Blizzard) and music (Universal Music Group). It is also the leading operator in alternative
telecommunications in France (SFR) and Brazil (GVT), the leader in telecommunications in Morocco (Maroc Telecom Group) and the leader in pay-TV
(Canal+ Group) in France.
• Activision Blizzard: the world leader in independent online and console video-game publishing, with leading positions in several sectors of the interactive
entertainment industry.
• Universal Music Group: the world leader in recorded music, with more than one in four records sold around the world, and the largest catalog of music rights.
• SFR: France’s largest alternative telecommunications operator and the largest alternative mobile phone and fixed-line operator in Europe.
• Maroc Telecom Group: Morocco’s largest fixed-line, mobile and Internet operator; active in Burkina Faso, Gabon, Mauritania and Mali.
• GVT: Brazil’s largest alternative telecommunications operator; the best performing high-speed Brazilian operator, offering innovative solutions and
products in the telephony and Internet markets.
• Canal+ Group: the French leader in premium and themed channel publishing and a major player in the aggregation and distribution of pay-TV offerings,
as well as in film production and distribution, in both France and Europe.
Vivendi also owns 100% of zaOza (a subscription-based community exchange and legitimate content sharing website), 93% of Digitick (the French leader in
e-ticketing), and 99.5% of Wengo (the French leader in phone-based expert assistance).
1.1. Strategy
Vivendi, a world leader in communications and entertainment, is active throughout the entire network chain, from the production and publishing of content
(video games, music, audiovisual works and films) to its distribution, primarily via digital networks.
Vivendi relies on the strength of its creative staff, engineers and major brands. Vivendi’s businesses all pertain to the digital and new technologies sector. They focus
directly on end-consumers through strong brands, including Activision Blizzard, Universal Music, SFR, Maroc Telecom, GVT, and Canal+, which offer digital-quality
creative content, telephony and high-speed Internet services. These common points represent competitive advantages for Vivendi that allow it to develop strong
skills, in particular in subscription management, branding, distribution platforms, content creation and copyrights, through a productive exchange of know-how and
by the anticipation of technological developments.
Vivendi’s performance is largely due to its subscription-based economic model: the Group’s expertise is strongly linked to the capture of subscribers, customer loyalty
and the optimization of subscriber-related revenue. This business model represents a major strength because it provides a recurring and therefore predictable revenue
stream. Combined with the close attention paid by the Group to its customers, this approach allows its businesses to create innovative new services in response to a
growing demand for mobility and high-speed services.
Vivendi’s development strategy includes strengthening its existing businesses, implementing synergies among entities when they create value, and expanding its
presence in high-growth territories or in operations related to its businesses that show high-growth potential.
In a period of steady growth in the use of digital services and their distribution models, Vivendi offers all its operating entities the necessary stability and support
to successfully respond to these changes.
Thus, since its inclusion within the Group, GVT, the most recent company to join the Vivendi Group, has been able to accelerate its investment and growth through
resources provided by Vivendi. It has also launched new products in Brazil (in partnership with Universal Music, SFR and Canal+ Group), which will allow it to
strengthen its reputation for innovation and competitiveness.
Vivendi also seeks to obtain exclusive control over its operating entities in France that have outstanding minority interests and expects to acquire the relevant minority
interests when and if the conditions are favorable. This strategy allows Vivendi to focus its efforts solely on controlled entities, and explains the sale of minority
holdings such as NBC Universal.
Vivendi has dedicated considerable financial and human resources to strengthening the competitive position of its businesses (i.e., through the purchase of TPS by the
Canal+ Group, the purchase of Bertelsmann Music Publishing by Universal Music, the purchase of the fixed-line-Internet activities of Télé 2 France and Neuf Cegetel
by SFR, the purchase of four telecommunications operators in Africa by Maroc Telecom Group and the merger between Vivendi Games and Activision that led to the
formation of Activision Blizzard). The Group is focusing on strengthening its growth in emerging countries (acquisition of GVT in Brazil, Canal+ Group operations in
Vietnam and Africa, as well as partnerships involving Activision Blizzard and UMG in Asia and the Middle East). It is also implementing an ambitious and proactive
policy based on innovation, investment in creation and networks, and synergies between businesses.
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Vivendi Description of the Group
Innovation
Vivendi puts innovation at the core of its development strategy. The continued launch of innovative products and services, combined with its diversification initiatives,
strengthens the commercial and financial results of its subsidiaries as well as their leading market positions in content, platforms and interactive networks.
Through a number of innovative offers aimed at the general public (e.g., the new Evolution neufbox, the first play-on-demand offer in the French television market),
SFR is enhancing its customers’ day-to-day digital experience. At the same time, the operator has taken an active approach to expanding its operational scope in
activities related to its core businesses such as new, connected home services (SFR Homescope). For the past several years, Universal Music Group has been
successfully involved in a number of diversification efforts, entering into marketing agreements with partners, signing “360°” agreements with its artists, offering
a range of services and content directly to music consumers, and investing in merchandising. Innovation is also a high priority for Maroc Telecom Group, which
offers services that incorporate the latest trends, such as Mobicash, the mobile phone-based money-transfer and payment solution. Canal+ Group is enhancing
its customers’ experience by providing a wide range of premium content and interactive services, at a time when the number of terminals connected to the Internet,
and screens on which it is possible to access programs, is increasing. Finally, the efforts of Activision Blizzard are materializing: its studios have implemented
development processes of incomparable quality, allowing them to release the most innovative games, in terms of both player participation on social networks
and ergonomics. For example, the use of movement-capture technology in the game Call of Duty: Black Ops allows for incredibly realistic facial expressions.
In October 2010, Vivendi formed an Innovation Division to strengthen this trend. Its purpose is to increase the number of internal initiatives, stimulate organic growth,
and identify new growth vectors. This approach is centered around four major axes:
• launching new plans for robust growth;
• developing cooperation between Group businesses;
• increasing visibility and accelerating the success of internal innovation plans within each business; and
• encouraging the recognition of external innovation.
To meet these objectives, the Innovation Division uses teams within each business area to implement a network of recommendations by the various communities
of experts, together with the Group’s assets in developing related operations.
A regular report on innovation within the Group is provided to the Management Board and Supervisory Board. An Innovation Committee and a “Greenlighting”
committee were formed to establish priorities and approve the allocation of specific resources for growth and diversification plans.
For example, GVT is using the expertise of Canal+ Group and SFR in connection with its launch of a pay-TV offering in Brazil. This exchange of know-how is resulting
in an acceleration of the operational implementation of the projects, which minimizes the risks incurred.
Each of Vivendi’s businesses are facing similar technical challenges, with the emergence of common consumer needs, and competition from the same players.
To give the Group greater oversight and enhance its prospects, the new Innovation Division will promote cross-disciplinary work on strategic issues, encourage
the recognition of the ecosystem of startups, and coordinate diversification initiatives.
Through this approach, the Group’s aim is to implement ambitious development projects that will generate opportunities for growth or differentiation from its
competition, at a time when digitalization and growth in network capacity and connectivity create major prospects for innovation.
Vivendi has achieved a number of accomplishments which it will seek to multiply by combining them with forward-looking initiatives to identify leading growth sectors
for the Group in coming years. These accomplishments include UMG’s launch of Power Music in Brazil for GVT subscribers, Maroc Telecom Group’s offering
of The Universal Music Plan in partnership with Universal Music and MTV as well as the marketing of Canal+ Group subscriptions at SFR stores.
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1.2. Highlights
1.2.1. 2010 Highlights
January
• Canal+ Group launches K+ in Vietnam, a new satellite pay-channel package.
• Maroc Telecom Group launches Mobicash, the first mobile phone-based payment and money-transfer service in Morocco.
• UMG joins Free All Music to offer its customers free downloads from the freeallmusic.com website in exchange for viewing short advertisements.
• UMG initiates a partnership with Netbiscuits, the leader in mobile publishing platforms, to develop and launch websites and services dedicated
to UMG artists for music fans.
February
• Vivendi acquires M6’s 5.1% interest in the share capital of Canal+ France and now holds 80% of Canal+ France through its subsidiary Canal+ Group.
• The Canal+ and i>Télé channels become accessible to individuals with hearing disabilities.
March
• Canal+ Overseas launches K+1, the first premium pay-TV channel in Vietnam.
• Canal+ Group introduces the first pay-DVB set top box for CanalReady-labeled televisions.
• GVT is designated by readers of the Brazilian magazine, INFO, as the most reliable fixed-line phone company in Brazil.
April
• GVT extends its operations to the cities of Fortaleza (Ceara), João Pessoa and Campina Grande (Paraíba). The company launches its Premium offering,
a complete package that includes phone and high-speed Internet access aimed at residential customers.
• UMG expands its mobile content and services for Spanish-speaking and bilingual fans, through the use of Mozes Connect, a platform that delivers
content via mobile phones.
May
• Maroc Telecom Group launches its Optimis offering, tailored to meet business needs.
• Activision Blizzard and Bungie announce an exclusive partnership under which Activision Blizzard will hold all publishing and distribution rights
for the studio’s forthcoming games.
• SFR launches its new Illimythics 5 offerings, including unlimited voice for the first time.
• Canal+ Group releases the new HD and Wi-Fi satellite set top box on a commercial basis.
• GVT launches Protect, a complete package of Internet security services.
June
• In the “Morrison” case, the US Supreme Court rules that shareholders who purchased or sold their shares on a non-U.S stock exchange could
not enforce US laws to claim damages.
• Canal+ Group launches Canal+ Sport on HD and Canal+ 3D, a 3D news channel for the soccer World Cup.
• Maroc Telecom Group doubles the speed of ADSL for its customers.
• SFR launches credit-transfer in international markets. This mobile phone-based payment services allows it to offer communications credits
to third parties living abroad.
• Canal+ Group’s offerings become accessible on iPad, Wi-Fi and in 3G/3G+.
• Vivendi completes its acquisition of GVT and now owns 100% of its share capital.
• SFR acquires additional 3G frequencies to address the growth in data traffic and Internet access on mobile phones for €300 million.
July
• The Lagardère Group starts the IPO process for its 20% ownership interest in Canal+ France.
• Activision Blizzard launches Singularity ™ on PS3, Xbox 360 and PC, and the StarCraft ® II: Wings of Liberty ™ PC game. The latter sells over 1.5 million copies
worldwide within the first 48 hours of its release.
• SFR reaches approximately 87% of the French population covered by 3G/3G+, thus exceeding the coverage goal of 84% set by the ARCEP.
• Vivendi refinances in advance a bank loan for €1 billion with a five-year term.
• The song I Gotta Feeling by the Black Eyed Peas is the first to surpass the threshold of six million downloads.
• Maroc Telecom Group launches the Mobicash international money-transfer service, allowing Mobicash customers to directly receive funds from abroad.
• GVT launches operations in the cities of Olinda (Pernambuco), Jundiaí and Sorocaba (São Paulo).
17
August
• The International Center for Settlement of Investment Disputes (ICSID) confirms its ruling in favor of Vivendi in the context of a legal action filed in
1997 involving a water concession agreement in the province of Tucuman in Argentina. Vivendi is awaiting compensation from the Argentine Republic.
• UMG enters into a long-term strategic alliance with 19 Entertainment, creator of the hit US television show American Idol, for the worldwide marketing,
promotion and distribution of the albums of the winning candidates and finalists.
• SFR enters into exclusive negotiations with La Poste, following a formal tendering process, to create a joint venture for a virtual mobile phone operator (MVNO).
• UMG and Reliance Communications sign a mobile phone music distribution agreement in India, the largest ever signed by an Indian telecommunications operator.
• The game World of Warcraft: Wrath of the Lich King, becomes accessible to players in mainland China.
• SFR launches Multi-Packs, a rebate program aimed at members of the same household who subscribe to several of its other services (mobile phone
subscription, ADSL, close-bundled and Internet 3G+ key).
September
• Under an agreement between Vivendi and General Electric (GE) setting forth the conditions for the sale of Vivendi’s entire equity interest in NBC
Universal, Vivendi sells 7.66% of NBC Universal to GE for an aggregate amount of $2 billion. Vivendi’s remaining 12.34% interest in NBC Universal
will be sold to GE for an aggregate amount of $3.8 billion at the close of the GE-Comcast deal.
• UMG and B’In enter into a partnership aimed at promoting and distributing the label’s Taiwanese pop artists in mainland China.
• GVT is ranked among the 20 most innovative companies in Brazil, according by the magazine Época Negócios.
October
• World of Warcraft passes the threshold of 12 million subscribers.
• Vivendi creates an Innovation Division, which is aimed at multiplying internal innovation projects, encouraging organic growth, and identifying
new growth opportunities.
• Maroc Telecom Group signs an agreement with the ANRT for the fourth and final tranche of the PACTE program (Telecommunications Access Program),
which will allow it to cover 1,573 sites by the end of 2011.
• SFR enriches its neufbox TV offering by presenting its customers with the first play-on-demand TV offering in Europe.
• UMG is vastly expanding its classical music program by developing Deutsche Grammophon and Decca Classics, its flagship labels.
• GVT launches the Power Music Club, a musical offer developed in partnership with Universal Music Brésil. This offer provides all GVT Power customers
with unlimited free access to thousands of songs and video clips by UMG artists worldwide.
• GVT launches operations in the cities of Niterói (Rio de Janeiro), Campinas and Piracicaba (São Paulo).
• Canal+ Overseas opens a subsidiary in Madagascar in partnership with the Sicam Group, the Canalsat Madagascar distributor since 1999. Canal+
Madagascar is 60% owned by Canal+ Overseas and 40% by the Sicam Group.
• Lady Gaga becomes the first artist to exceed 1 million streaming listens. Her closest rival, Justin Bieber, is also a UMG artist.
• GVT launches SOS Computer, a phone support and remote access service available 24 hours a day and seven days a week.
November
• Activision Blizzard releases Black Ops, a new title in the Call of Duty franchise, which sets a new sales record with revenues of $650 million worldwide
in the first five days of its release, making this game the largest launch in entertainment history. It also releases GoldenEye 007.
• Canal+ Group suspends analog broadcasts and Canal+ becomes 100% digital.
• UMG enters into a partnership with eMusic to offer the US members of its Digital Music Club access to its deep and rich catalog. This agreement
allows it to add 250,000 of its titles to eMusic’s catalog of 10 million songs.
• SFR launches neufbox Evolution, a box with a fluid 3D navigation interface, making the most advanced features immediately accessible
and understandable.
• GVT increases its minimum access speed on high-speed Internet from 3 Mbits/s to 5 Mbits/s, making this entry speed the fastest in the Brazilian
market. The company also launches operations in the city of Valparaíso de Goiás (Goiás).
• GVT initiates construction of its network in two mega-cities in Brazil: Rio de Janeiro and São Paulo.
December
• Canal+ Group makes its Canal+ and Canalsat offers available on the Xbox 360.
• SFR markets the Samsung Galaxy Tab and iPad with Wi-Fi + 3G and combines them with a range of dedicated bundled offers.
• Vivendi reaches a settlement with the Brazilian stock market authority, the Comissão de Valores Mobiliários (CVM), for approximately €67 million. This deal
puts an end to the inquiry opened by the CVM following the acquisition of GVT. As stated under Brazilian law, this settlement does not imply the
acknowledgement of any wrongdoing by Vivendi in the context of GVT’s acquisition, nor a determination by the CVM of any violation of the Brazilian Stock
Exchange regulations by Vivendi.
• Maroc Telecom Group launches the Universal Music Offer, in partnership with Universal Music and MTV. It offers exclusive and unlimited access to the
catalog of Universal Music video clips and to the four MTV television channels.
• Activision Blizzard releases Cataclysm, the latest extension of its World of Warcraft game, selling 3.3 million copies during its first day of sale and making
the PC game the fastest selling of all time.
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• Vivendi joins the Dow Jones Sustainability World Enlarged Index (DJSI World Enlarged), which includes the top 20% of the 2,500 companies comprising
the Dow Jones Global Total Stock Market Index.
• Maroc Telecom Group completes the privatization of Gabon Télécom, thus completing Maroc Telecom’s acquisition of a 51% interest in the capital
of Gabon Télécom SA.
• Vivendi signs agreements with Deutsche Telekom, M. Solorz-Zak (the majority shareholder of Elektrim) and Elektrim’s creditors, including the Polish
Government and Elektrim bondholders. The Group will receive €1.254 billion upon completion of these agreements, which will terminate all litigation
proceedings related to the shareholding in PTC, the Polish mobile phone operator.
• Vivendi, already a major shareholder through SFR, takes over Digitick, the French leader in electronic ticket sales for cultural events and leisure activities,
in association with that company’s founders.
1.2.2. 2011 Highlights
January
• GVT launches its operations in the city of Rio de Janeiro as well as in several cities in the São Paulo area.
• StudioCanal and RTL Television, the leading private channel in Germany, announce the signing of a framework agreement under which RTL
Television would offer all of StudioCanal’s international productions.
• Universal Music France places online its www.off.tv site, an internally produced “web TV” broadcasting musical programs.
• Canal+ Group and Orange announce their plan to create a joint venture to merge the Orange cinema series package with the TPS Star channel.
• GVT announces that it will invest €760 million to develop markets in Brazil in 2011.
• Vivendi sells its remaining interest in NBC Universal (12.34%) for an aggregate amount of $3.8 billion.
• The French anti-trust authority authorizes the creation of a new virtual mobile phone operator (MVNO) by SFR and La Poste.
• In the United States, Vevo is the number-one destination among music sites with an average of 60 million unique visitors per month on its network.
Its premium music catalog offers the largest collection of musical content available on the web.
• Vivendi receives €1.254 billion, thereby terminating the dispute about telecommunication assets in Poland.
February
• SFR launches a high-definition satellite television offering for its SFR neufbox customers unable to benefit from the TV offering on ADSL.
• In the class-action lawsuit in the United States, the US District Court for the for the Southern District of New York rules that, in applying the
“Morrison” decision of the US Supreme Court to Vivendi’s case, only United States, French, British and Dutch shareholders who acquired Vivendi
ADSs on the New York Stock Exchange may file a claim with a US court to seek damages.
1.3. Financial Communication Policy and Value Creation
1.3.1. Investment Policy
Creating shareholder value is based on increased profitability of the Group’s operations, through a vigorous innovation and investment policy.
Investment projects are selected on the basis of a multi-criteria analysis:
• ability to create growth that increases adjusted net income per share and generates cash;
• the return on capital employed compared to the weighted aggregate cost of capital, adjusted to reflect the specific risk of the acquisitions
in question, in the medium and long term; and
• in-depth risk assessment.
They are reviewed by the Vivendi Investment Committee, and thereafter by the Management Board, while the most material investments are reviewed by the
Strategy Committee and thereafter by the Supervisory Board. For major transactions, a post-acquisition audit is performed approximately one year after the
acquisition. This analysis re-examines the conditions of value creation by comparing actual operational and financial results with the assumptions made during the
investment decision process and then drawing lessons from this comparison to promote best practices within the Group.
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1.3.2. Financial Communications Policy
The purpose of financial communications is to provide all shareholders with precise and accurate information on the Group’s strategy, position, results and
financial development. This is in compliance with procedures adopted pursuant to applicable French standards, including the French Financial Security Act
of 2003, as well as International Financial Reporting Standards (“IFRS”) and benchmarks set forth in the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) report.
The Investor Relations department, in Paris and New York, maintains permanent relationships with analysts at brokerage firms, and with investment fund managers
and analysts. The department provides information to financial markets on a regular basis in order to convey a clear understanding of the various events impacting
the Group’s current and future performance. This team also manages the analyst/investor relations section of the Group’s website (www.vivendi.com) which is
updated regularly and is primarily directed at institutional investors.
Vivendi’s communications with institutional investors are also conducted through meetings organized in the main financial markets worldwide and through
the participation of its executives in investor conferences.
In 2010, Vivendi’s management, the Investor Relations team, and the Group’s senior business managers met with institutional investors over the course of
505 “events,” primarily in France, the United Kingdom and the United States, but also in other European countries, Brazil and Asia. These meetings allowed
management to present the Group’s results and prospects to the managers and analysts of 564 financial institutions, during road shows (35 destinations
visited over the year), investor conferences (participation in 16 conferences during the year) and meetings at Vivendi’s or its subsidiaries’ headquarters.
Communications with individual shareholders
Within the framework of best practices in corporate governance, Vivendi’s priority is to maintain communication with its individual shareholders. During the week,
shareholders can call the individual shareholders’ information department (toll-free at 0 811 902 209 in France and +33 1 71 71 34 99 outside France), which addresses
requests for information and answers questions. They can also visit the Group’s website, where several pages are dedicated to their requirements (e.g., broadcasting
of the annual shareholders’ meeting, which is a major meeting of individual shareholders, in real time or with a short delay).
Individual shareholders may also receive a number of documents upon request, by email or in hard copy form including: the Annual Report, the Activity and
Sustainable Development Report, the Letter to Shareholders’, the “Essentially Vivendi” document (a short document related to the Group’s operations), and
Press Releases. The Letter to Shareholders is sent in print version to all registered shareholders.
In 2009, Vivendi formed a shareholders’ committee, which provided a true link between management and all individual shareholders. Reflecting the diversity
of the Group’s shareholder structure, the committee has nine members, among which four are women and five, men. Half live in the French provinces. An SFR
employee and a Canal+ Group employee are also members. The committee meets two to three times per year and works on communications, information and
meetings with shareholders.
In 2010, Vivendi launched a Shareholders’ Club. To ensure equality, any person holding at least one share may be a member. Club members receive invitations
to general information meetings, topical information meetings (e.g., “Jeudi, c’est Vivendi”), training at the Ecole de la Bourse, previews of StudioCanal films, the
Shareholder Salon, Canal+ television broadcasts, the Vivendi Cup, the Vivendi Trophy, etc. These events are held in Paris or the provinces. In 2010, Management
Board Chairman, Jean-Bernard Lévy, traveled to Nantes and Bordeaux to explain the Group’s strategy to individual shareholders in those cities. Shareholders had
the opportunity to attend a total of seven general information meetings (in Nantes, Bordeaux, Lille, Rouen, Metz, Rennes and Paris), three “Jeudi, c’est Vivendi”
topical information meetings (on the topics of the Hadopi law, Create Joy and Activision Blizzard) and four training sessions at the Ecole de la Bourse.
1.3.3. Value Creation in 2010
In 2010, the Group focused on improving its business performance and integrating GVT following its acquisition in November 2009. The Group is also well positioned
to benefit from the growth in consumer demand for content, high-speed Internet access and interactive services around the world.
In 2010, the Vivendi Group continued to invest in its business units with net capital expenditure amounting to approximately €3.4 billion.
In 2010, Vivendi showed growth in its operations in every market in which it operates. The year was marked by a number of commercial and technology initiatives,
in terms of both service offerings and products. Thus, SFR retained its leadership position in the recruitment of new mobile phone subscribers in 2010 and increased
its share of the fixed-line and high-speed Internet market. Canal+ attracted over 200,000 new customers in 2010 and has essentially completed migrating its analog
subscribers to digital. Vevo, the music video platform launched by UMG in late December 2009, is rapidly assuming a leading position among musical entertainment
sites in the United States. Activision Blizzard has continued to develop three of its flagship franchises and launched a new installment in the Call of Duty series,
Call of Duty: Black Ops – which broke all five-day sales records with over $650 million in receipts worldwide – Starcraft II and Cataclysm, the third expansion pack of
World of Warcraft, the world leader in online games with over 12 million players.
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GVT’s development accelerated in 2010 following its acquisition by Vivendi in the fourth quarter of 2009. GVT is the fastest-growing fixed-line, high-speed, alternative
telecommunications operator in the Brazilian market. It offers a diversified portfolio of innovative products and state-of-the-art solutions for conventional telephony
and VoIP, data, high speed, and Internet services for all market sectors (retail to SMEs and large corporations). Due to its modern infrastructure, GVT is the only
Brazilian operator able to offer high speeds of up to 100 megabytes per second to the mass market. It repeatedly increased its 2010 projections for revenue and
income growth, as well as its 2014 projections, due to a doubling of its investment budget in 2010 and accelerated deployment of the network, specifically its
commercial launch in the states of São Paulo and Rio de Janeiro. The Group is currently projecting revenue of approximately BRL6 billion in 2014 for its fixed-line
and high-speed Internet activity (compared to approximately BRL5 billion previously), with an EBITDA margin of over 40%.
As of December 31, 2010, the Vivendi group’s net financial debt totaled €8.1 billion. At that date, the average maturity period for the Group’s debt was approximately
four years, and Vivendi SA had approximately €4.4 billion in available credit lines, net of commercial paper. The Group thus enjoys a solid financial position, allowing it
to pursue its strategy of value creation, comply with its commitment to distribute a dividend of at least 50% of its adjusted net income (a dividend of €1.40 per share
payable in 2011 for the fiscal year 2010 will be proposed at the Combined Ordinary and Extraordinary Shareholders’ Meeting to be held on April 21, 2011, and maintain
its quality rating (BBB).
Share Price
Vivendi shares are listed on compartment A of Euronext Paris (ISIN code FR0000127771). As of December 31, 2010, Vivendi had the twelfth-largest stock-market
weighting in the CAC 40 and the largest stock-market weighting in the Stoxx Europe 600 Media.
In a very volatile market environment, Vivendi’s stock-market performance in the first half of 2010 was hindered by several events. In January 2010, a US jury delivered
an unfavorable verdict in Vivendi’s class action lawsuit in the United Sates, requiring the Group to record a provision of €550 million for this risk. In May and June
2010, the share price was affected by a number of unfounded rumors of acquisitions in emerging markets (mobile phone markets in Brazil, Mexico and India). After
June 2010, its stock-market performance improved significantly due to a number of factors. On June 24, 2010, the US Supreme Court ruled that only shareholders
who had purchased their shares or other securities on a US stock exchange could claim damages in a class action suit in the United States, significantly reducing the
risk to Vivendi. After July 2010, the share price benefited from a rise in the stock-market indices and rising projections of Group results, and as of September 2010 from
recognition by the financial markets of Vivendi’s message focusing on organic growth, dividends and simplification of the Group’s structures through the purchase of
minority interests in Vivendi’s French subsidiaries. In this context, on December 31, 2010, Vivendi shares were trading at €20.2, down 2.9% compared to December 31,
2009 (after a decline of approximately 19% in the first half of 2010). During the same period, the CAC 40 fell by 3.3%, while the Stoxx Europe 600 Media and Stoxx
Europe 600 Telecommunication rose by 13.3% and 3.0%, respectively. Vivendi’s stock-market performance with dividends reinvested was 4.6 points higher than that
of the CAC 40.
Dividend per Share
A dividend of €1.40 per share was distributed in 2010 for fiscal year 2009, representing an aggregate distribution of more than €1.7 billion, a 5% increase compared
to the previous year. The payment of a dividend of €1.40 per share in 2011 for fiscal year 2010, representing an aggregate distribution of €1.73 billion, will be submitted
to the approval of the Ordinary Shareholders’ Meeting to be held on April 21, 2011. If approved, the dividend will be payable in cash from May 10, 2011.
1.4. Sustainable Development Policy
Vivendi considers its contribution to sustainable development to be vital and that it is the Group’s responsibility to enable present and future generations to satisfy
their communication needs, to nurture their curiosity, to develop their talents and to encourage the exchange of information.
The Group applies a rigorous and sustainable development policy, which considers the economic, social, societal and environmental responsibilities related to
its operations and its geographic presence. This policy requires Vivendi to clearly demonstrate its commitment to all of its partners: customers, shareholders,
employees, suppliers, public authorities and society at large.
Vivendi is a member of the United Nations’ Global Compact. This membership demonstrates the Group’s dedication to two basic objectives: reaffirming the Group’s
commitment to human rights while overseeing business expansion into new markets; and contributing to improved access to new information and communication
technologies for disadvantaged people, in order to strengthen social ties.
Vivendi was integrated into the Dow Jones Sustainability World Enlarged Index (DJSI World Enlarged) created by Dow Jones in late November 2010. The Group is
also referenced in the FTSE4 Good Global sustainable-development international stock market index produced by the FTSE, the ASPI Eurozone index produced by the
rating agency Vigeo, the Ethibel Sustainability Index (ESI) produced by Ethibel, and the ECPI Ethical Indices (ECPI Ethical Index Global, ECPI Ethical Index EMU, ECPI
Ethical Index Europe) produced by E-capital Partners. In addition, each year Vivendi contributes to the Carbon Disclosure Project (CDP, an international program that
publishes an Annual Report on the climate change strategies of the world’s 500 largest companies).
The Group was recognized by Vigeo as a leader in the media sector in its most recent non-financial rating of January 2011, and ranked by Goldman Sachs as among
the five best-positioned media companies in the world, in terms of economic performance and sustainable development (November 2009).
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Since 2009, the Vivendi headquarters has been certified by EMAS (Eco-Management and Audit Scheme) for its environmental efforts. Vivendi is one of the few
French companies to have received this award. This European certification is one of the most demanding awards in terms of environmental management and
commitment to stakeholders.
1.4.1. Principal Sustainable Development Issues
Vivendi’s sustainable development policy is defined based on the main features of a Group that produces and distributes content, is at the forefront of technological
changes created by high-speed and mobile technologies; uses a subscription-based model; and gains new markets in countries with high-growth potential.
The first of these features implies that the Group evaluates the opportunities and risks that its content or services could present to its various customers. This is why,
since 2003, Vivendi has identified three specific sustainable development objectives: protecting and empowering young people when they use multimedia services,
promoting cultural diversity and sharing knowledge (see below).
The second feature relates to maintaining a balance between keeping up-to-date with the digital revolution and the needs of its key stakeholders (including
employees, consumers, artists, suppliers and society at large), as well as regulatory requirements. Managing human capital, valuing content, paying attention
to suppliers and communicating with its partners are also among the Group’s sustainable development objectives.
The third feature relates to collecting and processing the personal data of subscribers and clients of the Group’s different business units. In every country where
Vivendi operates, the company seeks to meet subscriber expectations relating to content and service offerings while simultaneously maintaining a rigorous and
ethical policy for managing personal data.
The fourth feature relates to implementing an assessment of Vivendi’s contribution to the local development of emerging countries in which the Group operates.
This would take into account employment, capital investment, development of local talent and access to new information and communication technologies, one
of the key factors to a successful education system being pursued by state governments.
1.4.2. Vivendi’s Specific Issues
Vivendi has the responsibility of accompanying all audiences, particularly young people, in their cultural and media practices, while at the same time building a
more secure digital universe. In doing so, the Group must reconcile the development of content and service offerings favored by new technologies which provide
protection to young consumers from harmful practices or behavior. Mobile phones, Internet, games and films may contain sensitive content or lead to inappropriate
behavior. The Group’s business units work in collaboration with Vivendi’s sustainable development department to address this issue at Group level.
Vivendi seeks to promote cultural diversity as a necessary element of human dignity and a pillar of social cohesion. The group therefore shares UNESCO’s views,
as expressed in its Convention on the Protection and Promotion of the Diversity of Cultural Expressions (which came into force in March 2007) that cultural diversity
is “a mainspring for sustainable development for communities, peoples and nations”. Vivendi seeks to encourage the diversity of musical repertoires, promote
diversity of cinematographic and televisual expression, promote local talent and enhance national heritage.
Promoting knowledge sharing to strengthen both a spirit of openness with others and a mutual understanding is the third specific objective of Vivendi’s sustainable
development. Through its international position, the Group exercises a certain influence over the representation of cultures and through this it can promote mutual
understanding. It must ensure content quality, encourage dialog between cultures and facilitate access to new technologies. Vivendi contributes to reducing digital
divide by enabling students to benefit from advantageous service offers and by conducting training and educational activities for disadvantaged and deprived
individuals using new communication technologies.
1.4.3. Implementation of Sustainable Development Policy
1.4.3.1. Inclusion of sustainable development policies in the variable portion of management compensation
At the Shareholders’ Meeting held on April 30, 2009, the Chairman of the Supervisory Board announced the inclusion of sustainable development objectives
in the compensation for members of Vivendi management beginning in 2010.
The Management Board has thus requested that the criteria defined for each business unit reflect the know-how and positioning of each unit and that the criteria
are relevant, quantifiable and verifiable by a specialist firm.
This involves, when calculating individual bonuses, valuing the amount of individual contributions to sustainable development actions strategic to the Group,
such as partnering with young people in their media operations, promoting cultural diversity, and eliminating the digital divide.
Vivendi is one of the first companies in the CAC 40 to incorporate performance objectives linked to corporate responsibility, into the variable compensation
of its management. The non-financial rating agency Vigeo monitors the group in assessing its efforts.
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1.4.3.2. Sustainable Development Issues: Cross-Mobilization
The Chairman of the Management Board regularly includes sustainable development goals on the agenda for meetings of the Management Board or on those of the
Risk Committee. The Chairman invites experts to some of these meetings in order to analyze of the development of the Group’s operations with regard to sustainable
development challenges.
The Sustainable Development Department coordinates this task in close collaboration with operating departments at the corporate headquarters as well as those
of the Group’s business units.
Together with the Investor Relations Department, the Sustainable Development Department organizes meetings with the financial community to present the Group’s
sustainable development policy. In 2010, approximately 40 investors attended these dedicated road shows (USA, Canada and France).
The Sustainable Development Department works regularly with the Audit Department when the Risk Committee reviews sustainable development topics or other
more specific activities, such as the preparation of a questionnaire for completion by the principal suppliers of the subsidiaries. The two departments have prepared
a sustainable development risk map.
Together with the General Counsel’s Office, the Sustainable Development Department helps apply the Program for Compliance with Environmental, Health and Job
Safety Regulations adopted by Vivendi in 2000. It also contributes to promoting the Monitoring Program within the group and among its various partners. It
participates in tasks connected with the monitoring of Vivendi’s policies relating to the processing and collection of personal data.
In close collaboration with the Human Resources Department, it is involved in incorporating sustainable development criteria into the Group’s management
compensation. It also carries out initiatives to raise awareness of the Group’s social partners.
From 2003, the Sustainable Development Department has been assisted by a Sustainable Development Committee. This committee consists of individuals working
on issues related to sustainable development in the business units, together with representatives of several administrative divisions at headquarters level. It meets six
times per year to address specific topics.
In January 2010, a Sustainable Development Seminar brought together 70 participants and speakers, including representatives from civil society and various group
business units from around the world. It was an opportunity to remind them of the founding principles of Vivendi’s sustainable development policy and to hear the
expectations of stakeholders (investors, rating agencies, experts, academics and NGO representatives). The subsidiaries described their own experiences, thus
illustrating the inclusion of sustainable development objectives in their strategies. It is anticipated that another seminar of this kind will be held in 2012.
1.4.3.3. An Enhanced Communication with Stakeholders
Each year, Vivendi describes its policies, actions and non-financial reporting in an Activity and Sustainable Development Report, and in the document entitled
“Sociographics and Environmental Policy.” These documents are available on the Group’s website under the “Sustainable Development” and “Regulatory Information”
tabs, respectively. In addition to the indicators required by the New Economic Regulations Act (NRE Act), Vivendi publishes economic indicators, business governance
indicators, and indicators related to its specific operations.
For the ninth consecutive year, the 2010 Activity and Sustainable Development Report was certified on a moderate level of assurance by one of Vivendi’s statutory
auditors Salustro Reydel, a member of KPMG International, based on the testing of selected social indicators at the Group level and a selection of environmental
indicators at five of its businesses. This certification, as well as the reporting procedure, appear in the interactive version of the 2010 Activity and Sustainable
Development Report, and on the corporate website www.vivendi.com.
Vivendi is strengthening its contacts with its various partners, including, in 2010, through presentations of its policy to institutional agencies, universities,
and at international meetings.
Within the context of its partnership with the European Commission’s “Safer Internet” program, Vivendi is collaborating with European Schoolnet to launch the
online Pan-EU Youth platform. This unprecedented effort, is aimed at offering European youth a place to express themselves and discuss subjects related to
social initiatives. The Pan-EU Youth initiative offers three online discussion boards, covering the topics ”Youth in the media,” “Digital lifestyle” and “e-skills”.
Vivendi was invited by the United Nations to present its sustainable development policy and contribution to cultural diversity and dialog between cultures in the
context of the Alliance of Civilizations forum held in Rio de Janeiro in May 2010. The Group subsequently met with several international institutions and private
agencies to promote the evaluation of economic and social impact on culture.
Vivendi is a member of the “Culture and University” commission established by the Ministry of Advanced Education and Research, the aim of which is to encourage
and promote culture at university level. The Group has contributed to developing proposals contained in a report submitted in September 2010 to the presidents of
French universities and grandes écoles.
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In order to finalize the process of defining criteria for its specific objectives, Vivendi is one of the founding members of the Global Reporting Initiative media sector
working group. Publication of the GRI guidelines dedicated to the media sector is scheduled for 2011.
1.4.4. The “Create Joy” Solidarity Program
This solidarity program, launched in September 2008, forms part of the Group’s social responsibility initiative. Vivendi helps disadvantaged young people achieve
their full potential through its businesses: video games, music, telecommunications and Internet, television and films.
In 2010, Create Joy financed over twenty projects organized by associations working on behalf of young hospital patients (HopeLab, USA; Medicinema, GB;
Jeunes Talents, France), young people with disabilities (Fondation Mallet, Toiles Enchantées, Signes de Sens, France), and disadvantaged youth (Music For Youth,
GB; CDI, Brazil). The training provided and skills shared receive high priority in the selection of projects supported by Create Joy (Apprentis d’Auteuil in France;
France Volontaires and Institut des métiers spécialisés du cinéma in Morocco; BiblioBrousse, Lutt’Opie in Burkina Faso).
This program has been provided in the United Kingdom, the United States, Brazil, Morocco, Mali and Burkina Faso.
1.5. Human Resources
Vivendi is committed to ensuring that employee contributions are rewarded equitably. Consequently, the Group has implemented a profit-sharing policy that
exceeds legal requirements and that strongly encourages employee share-ownership. It keeps its social partners duly informed of the Group’s strategy, financial
position and social policies. Similarly, in addition to these internal provisions, Vivendi has applied a social responsibility policy to assist regions deeply affected by
unemployment and industrial restructuring in their industrial revitalization and job growth. Finally, the group has taken a number of actions to promote academic
success and knowledge of the business world for youth in disadvantaged areas and disabled students.
1.5.1. Employee Share Ownership and Employee Savings Plans
The year 2010 saw a continuation of measures launched in 2008 through the creation of the Opus program to promote employee share ownership within the Vivendi
Group (the simultaneous launch in France and abroad of “Opus 10,” a leveraged share capital increase with an investment and minimum return guarantee) and the
customary annual rights issue for employees of the group’s French companies.
Development of Employee Savings Plans in France
In 2010, employee share ownership and savings increased, through contributions made by the Group’s French companies under various participatory compensation
plans (statutory profit sharing, optional profit sharing and employer’s contribution): the allocation of a major and growing share of these employee savings to employee
shareholdings was maintained, and, at the same time, employees continued to diversify their savings within the various investment options offered to them under the
Vivendi Group Savings Plan (“PEG”) and investment options under their relevant company agreements.
In 2010, net amounts received by employees of the Group’s French companies under the optional profit sharing plans (intéressement), statutory profit sharing plans
(participation) and pursuant to contributions made by employers to the Group’s savings plan (Plan d’épargne groupe or PEG) were €96.8 million (up 5.1% over 2009).
The aggregate amount of new employee savings amounted to €70.8 million, €52.5 million of which were invested in the various PEG funds, with the remaining
€18.3 million being allocated by employees to retirement savings plans (e.g., Perco at SFR) and to various funds or plans maintained by their relevant companies.
Share Capital Increase for the Benefit of Employees
On February 24, 2010, the Management Board approved the annual share capital increase reserved for the Group’s employees through the PEG, as authorized by the
Shareholders’ Meeting of April 30, 2009. The transaction was successfully completed on July 29, 2010. For the third time in a row, the capital increase involved the
simultaneous launch of a customary employee offering (in France) and a French and international leveraged plan which included an investment and minimum return
guarantee, known as “Opus 10”.
In 2010, in addition to the same principal guarantee offered in 2009, a minimum guaranteed return was offered, compounded at the rate of 2.5% per year. “Opus 10”
was offered to employees in all major countries where the Group operates, i.e., France, the United States, the United Kingdom, Morocco, Germany and, for the first
time, Brazil and the Netherlands.
Despite a macroeconomic environment that remains difficult and rewards prudent behavior and attention to stock price, the “Opus 10” project was hailed as a
success, with aggregate subscriptions exceeding those in the previous two years. Overall, two portions of the 2010 capital increase (customary and leveraged)
resulted in a capital increase totaling €98.5 million, including €76.8 million for “Opus 10” (i.e., 42.6% over the 2009 level) and €21.7 million for the customary employee
offering (i.e., 25.5% over the 2009 level). As a result of this transaction, 7,148,169 new shares were issued, including 5,571,511 shares under “Opus 10” and 1,576,658
shares under the customary employee offering. This volume of newly-issued shares (a 47% increase compared to the 2009 capital increase reserved for employees)
represents 0.58% of Vivendi’s share capital. Upon completion of the transaction, the portion of Vivendi’s share capital held by its employees was 2.11%.
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8,773 employees subscribed to the capital increase, including 7,023 through “Opus 10” and 5,929 in the customary employee offering in France. The overall
participation rate of eligible employees amounted to an aggregate of 23.7% under the two plans, including 19% for “Opus 10” alone (37.4% of which was attributable
to employees in France and 4.3% to employees outside France). In France, 48.1% of the employees participated in at least one of the two employee offering plans.
Considering the confirmed success of the “Opus” program, on December 14, 2010, the Management Board resolved to renew the program in 2011 as part of the
employee share capital offering, in parallel with the customary employee offering.
1.5.2. Dialog between Management and Labor
In 2010, both sides of the Group-wide Labor-Management Committee, the European Labor-Management Group and Vivendi headquarters’ Labor-Management
Committee were regularly informed of the Group’s strategy, financial position, social policy and main achievements for the fiscal year. The Group-wide
Labor-Management Committee and the European Labor-Management Dialog Group were renewed, with certain newly-elected representatives from various
corporate entities, for the next four years. During the annual two-day training session, strategic challenges related to the digital revolution, knowledge of Vivendi’s
businesses and financial techniques were discussed.
Training is both a key component of the recruitment of young professionals and an asset to the company, which is thus diversifying its sources of recruitment.
Vivendi is continuing the commitments it made in 2009 to increase the number of employees on alternating work-study contracts within the Group. At year-end
2010, the Group employed 669 trainees under alternating work-study contracts (compared to 526 in 2009 on a like-for-like basis, an increase of 27%).
The Vivendi Group’s training policy encourages employees to acquire and strengthen the skills required to fulfill their objectives and to pursue their career
development. Employee training requests and needs are identified and discussed by management and employee representatives, as well as during each
employee’s annual evaluation. The percentage of payroll dedicated to training remains much higher than that required under French law.
For several years, Vivendi has been developing a training partnership with INSEAD (the European Business Administration Institute) to improve its future leaders’
skills. This made-to-measure training program has the following goals: to develop the skills needed to better understand the national and international business
environment, to be able to anticipate major future business trends, to learn best practices, and to challenge and redefine accepted experiences and beliefs.
The companies of the Vivendi Group continue to focus on occupational health and safety. In 2010, 6,037 Group employees received safety training. The frequency of
industrial accidents amounted to 2.58 in 2010. Since the rate is higher in on-site jobs, specific prevention programs were implemented in that field, particularly at SFR,
Maroc Telecom Group and Canal+ Group.
In relation to preventative measures, job safety and working conditions, studies have been conducted by various entities, which have resulted in the implementation
of training programs in these areas. Vivendi is pursuing the implementation of preventive measures to address problems associated with stress management and
psychological-social risks. These measures are tailored to each Group entity and cover areas such as the training of direct supervisors, implementation of a hotline
available to employees and information provided to the workplace representative agencies (IRPs) by a specialist physician.
The Vivendi Group encourages internal mobility among its various business units through three methods: an annual interview focusing on employee goals, a “people
review” performed by management and a dedicated website. This latter tool, accessible via the Intranet, was enhanced by the incorporation of new technologies
such as e-learning, to assist employees in preparing their mobility-related activities.
In addition, a succession plan covering top management positions and high-potential employees has been adopted within each group business unit. As soon as
emerging leaders are identified, they are guided into a development plan that encourages greater mobility between the Group’s various businesses.
1.5.3. Contribution to Employment Development
In 2004, Vivendi provided undertakings to the French public authorities to contribute to the creation of jobs in the regions most affected by unemployment and
industrial restructuring in two different ways:
• creating, via subcontractors, two call centers linked to the Group’s activity; one in Belfort at year-end 2005, the other in Douai at year-end 2006, with the
aim of attaining 300 full-time equivalent (FTE) jobs at each center. As of year-end 2010, the work force at these centers amounted to an aggregate of 448
and 404 FTE jobs, respectively; and
• assistance in the revitalization of fragile or damaged employment areas selected by the Ministry of Economy and the Ministry of Industry: assistance in
advising and financing job-creation projects, in the amount of €5 million per year over five years.
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Interim results of the missions under the 2005/2009 five-year agreement: 4,084 jobs created
The interim results of the eleven program missions under the five-year agreement (2005-2009) were quite satisfactory: as of December 31, 2010, jobs certified
by commitment committees, which were set up with public authorities in each relevant area, totaled 5,243, and actual job creations totaled 4,084, representing
over 78% of certified jobs.
The first employment area program was set up in March 2005 and the latest program was launched in March 2008. Each program has a minimum operating lifetime
of three years. This explains why a final analysis of the five-year agreement (2005-2009) at year-end 2010 is not yet complete. As of December 31, 2010, Vivendi had
exceeded its overall commitment to create 2,800 jobs by 87% (in terms of certified jobs) and by 46% (in terms of jobs already created) throughout all the employment
areas. These results were obtained even though the active phase of the project (identification and validation of applications) was completed in only five territories and
will continue in one of the eleven areas (Haut-Jura) in 2011.
In 2010, several projects under the program underwent an extended operating phase which extended beyond the three years at the request of the public authorities in
Abbeville and Montdidier (Somme), Thann-Cernay (Haut-Rhin), Pas-de-Calais (extension focused on the Calais area), and Tonnerrois (Yonne). In addition, upon
completion of the operating phase in these areas, the economic development companies involved remained in these territories in order to follow the progress of
the programs and ensure that scheduled jobs were in fact created.
In the first areas where the program was implemented, effective job creation exceeded the target by 157% in Arles, 73% in Oise, 71% in Dreux and 34% in Sarrebourg.
Job-creation goals were also surpassed in several newer areas: by 96% in Somme, 50% in Thann-Cernay, 42% in Pas-de-Calais and 12% in Chalon-sur-Saône.
The Tonnerrois project also achieved its actual job-creation goals. In the Autun-Château-Chinon area, scheduled job creations have exceeded the target by 25%,
but actual jobs created have not yet attained the applicable target; these jobs are expected to materialize in 2011.
80% of the companies assisted in these areas were either manufacturers, agribusinesses, public works and civil engineering or industrial services providers.
15% were in trade or craft work. The remaining percentage was made up of companies in tourism and homecare services. 70% of the aided projects involved the
development of existing companies, 26% the creation of new companies and 4% acquisitions. Almost all aided companies were either small, medium-sized or very
small businesses. More than 85% of all approved projects are carried out by companies from these areas. Dreux is the only exception, since 60% of projects come
from companies located outside the area.
At year-end 2010, Vivendi had granted €28.74 million to job creation in the eleven employment areas since 2005, under the terms of the first five-year agreements. Equity
loans and subsidies to companies account for approximately 70% of the total budget, with the remaining 30% assigned to the fees of industrial revitalization companies.
New commitments (2010 / 2012)
In the first quarter of 2009, Vivendi agreed on new targets set by the French Government for its contribution to the development of jobs over a three-year period (2010 to
2012). In addition to maintaining its previous commitments in relation to the call centers of Belfort and Douai, Vivendi has agreed to create 1,800 new jobs in three years in
addition to jobs created under its previous commitments, and to allocate five to six million euros per year to meet this goal.
The first areas under this new initiative were assigned to Vivendi by the Ministry of Economy and the Ministry of Industry in late 2009. They included Châtellerault (Vienne),
Montluçon (Allier) and a new mission in Oise with priority in Beauvaisis.
The mission at Châtellerault is unique in that the Government has asked Vivendi to combine its revitalization initiatives with five revitalization agreements entered into with
companies active in the area that have been restricted from reducing their workforce through PSE. 452 jobs have been certified at Châtellerault. As of December 31, 2010,
almost 170 had been created. The new program mission at Oise has been successfully launched: 531 jobs are already scheduled. In the Monluçon area, 65 jobs have been
scheduled. In total, a program to create 1,048 jobs was certified in 2010 in these three employment areas.
As of the summer of 2010, three new areas were designated by the public authorities: Ploërmel (Morbihan), Vendôme (Loir-et-Cher) and a new mission at Calais. These
three missions were successfully launched in the fourth quarter of 2010.
In 2010, Vivendi allocated an aggregate of €5.02 million to finance these new commitments.
1.5.4. Equality of Opportunity in Educational Programs
Passeport Avenir
By creating the “Telecom Engineer Passport” (Passeport Ingénieur Télécoms) in 2005, SFR and the French public authorities intend to facilitate access to engineering
schools for young people in deprived areas and offer them the prospect of high level careers in communication technology businesses. SFR’s objective is to create
genuine and exemplary situations of academic and professional success for young people, within companies located in disadvantaged neighborhoods, by using the
appeal of the telecommunications business. This program is the first to include all key players: teachers, companies, higher education institutions, local policy-makers
and young people themselves.
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A “Circle” that has gradually grown
In 2006, the program expanded to the “Telecom passport circle” (Cercle passeport télécoms) association, to include in SFR’s initiative six other companies in the sector
(Alcatel Lucent, Ericsson France, Motorola France, Nokia Siemens Network and Siemens France), in partnership with the National Education Ministry and the Ministry
of Employment, Social Cohesion and Housing.
In 2007, new partners joined the Cercle: Crédit Mutuel, the Formule 1 hotels, Orange and the Alcatel-Lucent Foundation. The first one offers all students at a partner
school a system of loans without parental co-signing responsibility. The second offers students two free nights at a Formule 1 hotel during examination periods, if they
are required to travel far from home. Orange strengthens and expands the Cercle’s presence in the field and the commitment of the telecommunications sector to
equal opportunity and social promotion. The US-based Alcatel-Lucent Foundation, with a network of 70 English-speaking mentors, offers young Cercle beneficiaries
phone interviews and conversation. In 2010, 14 companies, 12 of them in the new information and communications technologies sector, joined the program, which
was renamed “Passport to the Future” (Passeport Avenir).
Key figures 2010 / 2011:
• 57 technology prep classes (ATS, TSI, ECT) and professional classes at 41 major engineering and management schools partner with Passeport Avenir.
2,620 students benefit from group mentoring at these establishments;
• 688 volunteer mentors (from 14 partner companies – 149 mentors from SFR) provide individual assistance to 711 students, 458 of them in preparatory
classes and 253 in higher education;
• throughout the previous two years, 92% of students who worked with personal mentors in preparatory classes passed their entry examinations to major
engineering or management institutions; and
• 74% of them are beneficiaries of government scholarships.
A Future Together
Vivendi is also a partner with SFR in the “A Future Together” (Un avenir ensemble) program, created and managed by the Office of the Grand Chancellor of the Legion
of Honor. This involves sponsoring a deserving student of modest means and monitoring him/her during his/her academic career.
Mobi3
Mobi3 is a program which has existed since 2008. It is offered to participants, following an entrance examination, by five companies involved in the life-cycle of cell
phones: Dassault Systems, DLA Piper, IBM, Nokia and SFR, in partnership with IMS-Entreprendre pour la Cité. Mobi3 forms part of the “Engage” program, supported
by the Ministry of Education, with the aim of developing a social commitment among employees across Europe. It challenges teams of middle school students to
develop the cell phone of the future as part of their DP3 (3-hour professional discovery) experience. Consequently, the students study the life-cycle of a cell phone
from 3D design to sale and cover marketing, legal aspects and logistics. In 2010-2011, six high-schools in Ile de France participated in the third edition of the program.
Télémaque
The Télémaque Institute was formed in July 2005, in partnership with the National Ministry of Education and 15 companies (Adecco, Axa, BPCE, Cisco, Darty, EDF,
La Poste, PPR, Rexel, Schneider Electric, SFR, Technip, Total, UBS and Véolia).
Its task is to support smart and motivated youth (high-school students attending priority education establishments or participating in professional training) from
disadvantaged backgrounds to give them every chance to succeed, according to their merit. The goal is for them to complete their secondary education and to
graduate with a baccalaureate diploma with good or very good grades.
The effort is based on individual academic and personal monitoring, from middle-school to receipt of a baccalaureate diploma. This is done through a dual mentoring
program, both academic and professional, and financial support to allow them to build and successfully carry out their own projects. In 2011, the Télémaque Institute
supported 200 youths (ten of whom were partnered with SFR mentors) throughout Ile de France, Rhône Alpes and Nord.
ARPEJEH
Based on the finding that most students with disabilities stop their studies at the end of middle-school, SFR, in 2008, set up the ARPEJEH association (Assisting Young
and Disabled Students to Complete their Studies), with the participation of businesses and government entities from all sectors.
The aim is to help students with disabilities avoid self-criticism by showing them that they can pursue a worthy professional career. To do so, the association organizes
“job discovery” workshops in middle-schools. This is an opportunity for disabled young persons to realize that a place exists for them in the business world and that it
is therefore essential that they continue their studies. A framework agreement that has just been signed with the French Ministry of National Education relating to the
three academies of Ile-de-France evidences the importance of these measures. Currently, over 100 company internships have been organized, as have several
“business discovery” workshops and other company visits and explorations. Today, the ARPEJEH includes 40 companies, including L’Oréal, LVMH, Air France, and RTE
(Transport and Electricity Network). The association is chaired by Vivendi Group Human Resources Director, Stéphane Roussel.
In the future, ARPEJEH will seek to remain the link between students with disabilities and the world of work. There will be further internships and discovery
workshops. Mentoring activities are also in the process of being launched.
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1.6. Insurance
Vivendi has a centralized policy under various insurance schemes to cover certain risks it faces.1
The insurance schemes are established to supplement any risk-prevention procedures currently in place on-site. These include return to work or first-aid plans in the
event of a disaster affecting the nerve center of a given business, as well as environmental protection measures.
In 2010, Vivendi signed or renewed the following principal insurance schemes.
Property damage and business interruption
General insurance schemes for the entire Group are in place for an aggregate coverage of up to €400 million per loss. These schemes cover the risk of fire, water
damage, natural events, terrorism (depending on the legal restrictions applicable in each relevant country/state) and business interruption resulting from these events.
In general, the applicable deductible per incident is €250,000.
Third-party liability
Business and product third-party liability schemes have been implemented and provide aggregate cumulative coverage of €150 million per year for the entire group.
This amount supplements the various so-called first-line policies contracted directly by the business units (i.e., Universal Music Group, SFR, Maroc Telecom Group,
GVT and Canal+ Group) for an aggregate amount between two and sixteen million dollars or euros, as applicable.
Work accidents
Certain schemes are specific to operations undertaken in the United States, particularly those relating to work accidents, for which the employer remains responsible
for insurance purposes. So-called workers’ compensation programs have been implemented to address the requirements under various federal and state laws.
1.7 Investments
The main Vivendi’s investments include the acquisitions of financial investments, as described in Section 1.1 of the Financial Report, as well as content investments
and capital expenditures, as described in Sections 3 and 4.2 of the Financial Report. The impact of these investments on Vivendi’s financial position is described in
Section 5 of the Financial Report. The impact of the financial investments on the Consolidated Statement of Financial Position is described in Note 2 to the
Consolidated Financial Statements, and the impact of content investments and capital expenditures on the Consolidated Statement of Financial Position is described
in Notes 10, 11, 12 and 13 to the Consolidated Financial Statements. Moreover, the contractual commitments assumed by Vivendi, as part of the acquisitions of
financial investments, as well as content investments and capital expenditures, are described in Note 26 to the Consolidated Financial Statements. Capital
expenditures broken down by geographic region and business are presented in Note 3 to the Consolidated Financial Statements. Vivendi Group is not planning any
future investments for which Management has already contracted firm commitments, other than those described in Note 26 to the Consolidated Financial Statements.
1. Activision Blizzard and GVT have their own insurance programs.
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Section 2 Description of the Group’s Businesses
2.1. Activision Blizzard
Activision Blizzard is one of the largest video game publishers and online entertainment companies in the world. It was formed in 2008 by combining Activision
and Blizzard Entertainment, two of the leading players in the field of video games.
Activision Publishing, Inc. (Activision) is a leading worldwide publisher of interactive software products and peripherals. Activision develops and publishes video
games for various consoles, handheld platforms, mobile phone devices and the PC through internally developed franchises and license agreements.
Blizzard Entertainment, Inc. (Blizzard) is a premier developer and publisher of entertainment software renowned for creating some of the industry’s most critically
acclaimed games, as well as the leader in the subscription-based massively multiplayer online role playing game (MMORPG) category in terms of both the number
of subscribers and revenues. Blizzard internally develops and publishes Windows- and Mac-based computer games and maintains its proprietary online-game related
service, Battle.net ®.
Activision Blizzard’s portfolio of proven franchises is unmatched in the industry. The company’s core franchises include Activision Publishing’s Call of Duty ® and
Blizzard Entertainment’s World of Warcraft ®, StarCraft ® and Diablo ®. Each of these franchises is a long-standing leader in its respective genre. Publishing’s Call of
Duty ®, World of Warcraft, StarCraft and Diablo have strong online player communities. For calendar 2010, Activision Blizzard was the #1 publisher overall in North
America and Europe. Call of Duty: Black Ops ™ was the #1 title in the market overall in North America and Europe selling through more than 20 million units in the
calendar year. In addition, Activision Blizzard was the #1 publisher on the PC in North America and Europe and had three of the top-five titles with Starcraft II: Wings of
Liberty ™, World of WarCraft: Cataclysm ™ and Call of Duty: Black Ops. (Source: The NPD Group, Charttrack and Gfk).
In addition to Activision Blizzard’s wholly owned portfolio of franchises, in May 2010, Activision entered into an exclusive 10-year partnership with Bungie Studios,
the developer of such blockbuster game franchises as Halo, Myth and Marathon, to bring Bungie’s next big action game universe to market. Under the terms of the
agreement, Activision will have exclusive, worldwide rights to publish and distribute all future Bungie games based on new intellectual property on multiple platforms
and devices.
Activision Blizzard’s existing core franchises, coupled with Bungie’s new game universe, as well as a new massively multiplayer online game currently in development
by Blizzard Entertainment, should provide the company with a solid foundation for long-term growth. The company’s strong financial position, its global best-in-class
retail and online distribution capabilities and its proven ability to generate value should enable it to grow its biggest franchises through innovation, establish new
online business models, expand within Asia and into new geographies and to continue to partner with the industry’s best development talent.
2.1.1. Activision Publishing Product Highlights
Activision Publishing has been best known for its action/adventure, action sports, role-playing, simulation, first person action, and music-rhythm video game products.
The company has had long-term success in the first person action categories, particularly through its Call of Duty intellectual property, including the latest release,
Call of Duty: Black Ops, and it intends to continue its development of this franchise. In aggregate, the Call of Duty franchise has achieved approximately $4.8 billion life
to date revenue and has an active global community of approximately 20 million players.
The strength of the Call of Duty online presence, its large base of players, coupled with the growing installed base of Internet-connected game consoles, provides
Call of Duty with a competitive advantage that is difficult for competitors to replicate.
The latest game in the Call of Duty franchise, Call of Duty: Black Ops, was launched on November 9, 2010 and became the biggest entertainment launch ever in its
first 24 hours, selling approximately $360 million (retail value) in North America and the United Kingdom, according to internal Activision estimates. This marked the
second consecutive year that Call of Duty set day one launch records across all forms of entertainment. The game also established an all-new five-day worldwide
sell-through record of more than $650 million (retail value), exceeding Activision’s previous five-day worldwide sell-through record of $550 million set by last year’s
Call of Duty: Modern Warfare ® 2, according to internal Activision estimates.
In addition to Call of Duty: Black Ops, during calendar 2010, Activision Publishing released the following games, among other titles, Bakugan ™: Defenders of the Core;
Blur ™; Cabela’s Dangerous Hunts ™; Cabela’s Monster Buck Hunter ™; Call of Duty: Modern Warfare 2 ™ map packs; DJ Hero 2 ™; GoldenEye 007 ™; Guitar Hero ®: Warriors
of Rock ™; How to Train Your Dragon ™; James Bond 007: Bloodstone; Tony Hawk ®: SHRED ™; Spider-Man ™: Shattered Dimensions; Shrek Forever After ™; Singularity ™;
Transformers: War For Cybertron ™; and Zhu Zhu Pets ™.
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Vivendi Description of the Group’s Businesses
2.1.2. Blizzard Entertainment Product Highlights
Since 2004, when Blizzard Entertainment first launched its subscription based MMORPG: World of Warcraft, the franchise has experienced major sequential
growth. In August 2010, the company released the second World of Warcraft expansion pack, World of Warcraft: Wrath of the Lich King ® in China, which created
an unprecedented record in subscription sales. Subsequently, starting from December 7, 2010, World of Warcraft: Cataclysm ® (the third expansion pack) was
launched in every region the game is supported, other than China. With Cataclysm, Blizzard created extensive new content for new, existing and returning players,
and also updated the majority of former content, to deliver a more sophisticated and enjoyable experience.
Today, World of Warcraft is available in North America, Europe (including Russia), China, South Korea, Australia, New Zealand, Chile, Argentina, Southeast Asia and
the regions of Taiwan, Hong Kong and Macau. In the Asian market, Blizzard distributes World of Warcraft directly through its local subsidiaries, partners and license
agreements. In 2009, Blizzard entered into a license agreement with NetEase.com, Inc. for the operation of World of Warcraft in China. In addition, Blizzard granted a
license to NetEase for the release of StarCraft ® II: Wings of Liberty ™, Warcraft ® III: Reign of Chaos ® and Warcraft ® III: The Frozen Throne ® in China.
During 2010, Blizzard Entertainment also continued to strengthen its digital distribution capabilities and expand its global footprint. On July 27, 2010, the company
launched the sequel to StarCraft, StarCraft II: Wings of Liberty simultaneously around the world, including in North America, Europe, South Korea, Australia, New
Zealand, Russia, Brazil, Chile, Argentina, Southeast Asia and the regions of Taiwan, Hong Kong, and Macau. Within 48 hours, sales of StarCraft II: Wings of Liberty
had exceeded 1.5 million copies, making it the fastest-selling strategy game in history. The game continued to sell more than three million units within the first month,
based on findings in internal company records, public data, and/or reports from key distribution partners.
Simultaneous to the release of StarCraft II: Wings of Liberty, Blizzard launched a new version of its online gaming service, Battle.net, thereby establishing itself as the
industry’s foremost online gaming destination for Blizzard gamers. In addition to StarCraft II: Wings of Liberty and World of Warcraft, Battle.net will inspire Blizzard’s
subsequent new releases, and is designed to keep players connected to their friends regardless of the Blizzard game they are currently playing. The service offers
players advanced communication features, social networking, player-matching and digital content delivery, enabling a unique and connected experience for millions
of players across multiple brands.
2.1.3. Seasonality
The interactive entertainment industry is highly seasonal, with the highest levels of consumer demand occurring during the year-end holiday buying season.
Exposure to the seasonal nature of the business can be minimized to a certain degree by releasing core titles at times other than the end-of-year holiday season
and by launching selected downloadable content for core titles. The subscription-based MMORPG business provides a more constant revenue stream throughout
the year, as players pay a monthly subscription fee or purchase hourly time cards in order to play.
Activision Blizzard voluntarily participates in self-regulatory rating systems established by various worldwide video game industry organizations. In the United
States and Canada for example, the group adheres to the principles adopted by the Entertainment Software Rating Board (“ESRB”). It also adheres to the Pan
European Game Information (“PEGI”) rating system, pursuant to which Activision Blizzard ensures that the age group for which a particular product has been
designed is displayed on its product packaging and advertising. It also complies with advertising guidelines and online privacy principles and provides a brief
description of the product’s content on its packaging.
Blizzard offers a parental control option for parents whose children play World of Warcraft. The system allows parents, as the account holders, to monitor and manage
their children’s gaming time. By enabling the parental control system, parents can select the days and times during which their children may play (e.g., exclusively
on weekends or one or several pre-determined weekdays between certain hours) and the frequency of breaks (e.g., every thirty minutes or once an hour). Anyone
attempting to log on to the game outside the authorized times will be denied access. In addition, Activision Publishing’s console-based games are compatible with
the parental controls built into the game consoles.
2.1.5. Piracy
Piracy is a serious concern for video game publishers. Activision Blizzard combats copyright infringement through its own anti-piracy department and in
collaboration with third parties, including other publishers and trade associations. Activision Blizzard utilizes emerging business models that embrace the
Internet while simultaneously using technology to thwart piracy. Another international enforcement challenge comes in the form of unauthorized server
systems. Organized international groups circumvent security measures and reverse encryption codes to facilitate unauthorized online play of Activision
Blizzard titles. Some unauthorized servers require the use of pirated software and/or a “donation” in order to play, which is far less than the cost of legitimate
software or monthly subscription rates. Activision Blizzard robustly protects its intellectual property rights against infringement, including taking legal action
where such measures are deemed appropriate. It also refers offenders to the criminal authorities, supports prosecutions and provides training for customs
and law enforcement officials.
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2.1.6. Competition
Through Blizzard Entertainment’s World of Warcraft, Activision Blizzard is the leader in the subscription-based MMORPG category. World of Warcraft is the only
MMORPG that has experienced major success in all key markets (North America, Europe and Asia). Competitors also published in MMORPGs include NCSoft,
Sony Online Entertainment, Electronic Arts and Funcom.
Competitors in the console, handheld, mobile and PC games sectors include, among others, Electronic Arts, Konami, Take-Two Interactive, THQ and Ubisoft
entertainment, as well as Nintendo, Sony and Microsoft which publish video games for their own platforms.
The principal raw materials used in the Activision Blizzard businesses are polycarbonates for the production of CDs and DVDs, paper and plastic materials for the
packaging of its products and other plastic materials for console game accessories and PCs. These raw materials are not subject to price fluctuations that could have
a material impact on Activision Blizzard’s business. However, polycarbonates, the plastic materials used in certain packaging, hardware accessories and peripherals
(guitars, drums, etc.) may be subject to price variations as a result of a fluctuation in oil prices. Activision Blizzard’s business operations are not dependent on raw
material suppliers.
Capitalized software development costs include amounts paid to entitled beneficiaries for the use of their intellectual property content, in order to develop new games
(e.g., software development, graphics and editorial content), direct costs incurred during the internal development of products, and the acquisition costs of software
developed outside of the company. Software development costs are capitalized when the technical feasibility of the software has been established and they are
considered recoverable. These costs are mainly generated by Activision Blizzard as part of the games development process and are amortized using the estimated
revenue method (i.e., based on the ratio of the current period’s gross revenues to estimated total gross revenues) for a given product. Non-capitalized software
development costs are immediately recorded as research and development costs.
For the year 2010, research and development expenditure for Activision Blizzard amounted to €765 million (compared to €716 million in 2009), and consisted of all
internal or external net costs charged against earnings for the periods reported.
2.2. Universal Music Group
Universal Music Group (“UMG”) is the largest music content company in the world2 with market leading positions in recorded music, music publishing and merchandising.
The recorded music business identifies and develops recording artists; it also markets and promotes their music on a worldwide basis in all formats and on all
platforms. UMG continues to expand its participation in other operations related to its recording artists, including touring, sponsorship and brand rights management.
In the music publishing business, UMG finds and develops songwriters and owns and administers copyrights to musical compositions (as opposed to recordings)
for use in recordings, public performances and related uses such as films and advertisements.
The merchandising business produces and sells artist and other branded products via multiple sales points including fashion retail, concert touring and the Internet.
2.2.1. Recorded Music
UMG’s recorded music business is the largest in the world2 with market leading positions in most of the world’s major music markets, including the United States, the
United Kingdom, France and Germany. The development of the digital market and new innovative business models has enabled UMG to improve its performance in
the BRIC (Brazil, Russia, India, and China) countries as well as expand its presence into other emerging markets, such as the Middle East and Eastern Europe.
UMG is not dependent on any particular artist or music trend, due to the diverse array of its labels. These cover leading markets and the majority of other markets
across the globe. UMG’s labels complement each other through their focus on different genres and music segments, thereby mitigating the effect of changes in
consumer taste. UMG’s major recording labels include popular music labels (such as Island Def Jam Music Group, Interscope Geffen A&M Records, Universal Music
Nashville, Mercury Records, Polydor and Universal Motown Republic Group), classical and jazz labels (such as Decca, Deutsche Grammophon and Verve).
2. Source: Music & Copyright.
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Best-selling albums in 2010 included titles from a diverse selection of artists, including best selling acts such as Eminem, Black Eyed Peas, Rihanna, Take That and
Bon Jovi and emerging talents such as Lady Gaga, Justin Bieber, Drake and Florence and the Machine. Regional best sellers included titles from Japan’s Masaharu
Fukuyama and Hideaki Tokunaga, France’s Mylene Farmer and Les Pretres and Germany’s Unheilig.
Sales from prior releases account for a significant and stable part of UMG’s recorded music revenues each year. UMG owns the largest catalog of recorded music
in the world, with performers from the United States, the United Kingdom and around the world, including ABBA, Louis Armstrong, Chuck Berry, Black Sabbath,
James Brown, The Carpenters, Eric Clapton, Patsy Cline, John Coltrane, Elvis Costello, Count Basie, Def Leppard, Dire Straits, Ella Fitzgerald, The Four Tops, Serge
Gainsbourg, Marvin Gaye, Bebel Gilberto, Guns ‘N Roses, Johnny Hallyday, Billie Holiday, Buddy Holly, The Jackson Five, The Jam, Elton John, Herbert von Karajan,
The Kinks, Kiss, Andrew Lloyd Webber, Lynyrd Skynyrd, The Mamas & The Papas, Bob Marley, Dean Martin, Nirvana, Mike Oldfield, Luciano Pavarotti, Tom Petty,
Edith Piaf, The Police, Smokey Robinson, The Rolling Stones, Diana Ross & The Supremes, Michel Sardou, Frank Sinatra, Dusty Springfield, Cat Stevens, Rod
Stewart, Caetano Veloso, Muddy Waters, Barry White, Hank Williams and The Who.
UMG markets its recordings and promotes its artists through advertising and exposure in magazines, on radio and TV, via the Internet and mobile phone devices and
through point-of-sale material. Public appearances and performances are also important elements in the marketing process, which is carried out on a country-bycountry basis although global priorities and strategies for some artists are determined centrally. Television advertising plays an important role in the marketing of
compilations and new albums. UMG is also very active in developing new sources of revenue including expanded rights arrangements, often described as ‘360°
deals’, through advertising and sponsorship agreements and participation in theatrical and TV production. In 2010, UMG entered into a long term agreement with
19 Entertainment for American Idol. UMG’s Interscope label will globally market, promote and distribute albums from American Idol’s finalists and winning
contestants across a broad array of retail and new media platforms.
UMG plays a leading role in the expansion of the digital music market and continues to encourage and support innovation. In 2010, UMG entered into several strategic
marketing partnerships with major telecommunications companies in emerging markets such as Reliance in India and Qtel in Qatar, Kuwait and Oman. UMG has also
partnered with GVT, a Brazilian subsidiary of Vivendi, to offer a musical service to GVT’s customers for the first time. UMG is a participant in VEVO, a US -based
premium video service launched in December 2009 in the United States and Canada. VEVO was immediately the number one Music/Entertainment network in the
United States and the service will be rolled out across the rest of the world commencing in 2011.
UMG has outsourced the bulk of its manufacturing operations and the management of its distribution activities to third parties.
2.2.2. Music Publishing
Universal Music Publishing Group is the world’s leading music publishing company 2. Music publishing involves the acquisition of the rights to and the licensing of
musical compositions (as opposed to recordings). UMG enters into agreements with composers and authors of musical compositions for the purpose of acquiring
an interest in the underlying copyright so that the compositions may be licensed for use in sound recordings, films, videos, commercials and live and other public
performances (e.g., broadcasting and film performances). UMG also licenses compositions for use in printed sheet music and song portfolios. UMG generally seeks
to acquire rights but also administers musical compositions on behalf of owners such as other music publishers and authors who have retained or acquired such rights.
UMG’s music publishing company is also a global leader in both Classical music and the Production Music Library businesses. Through its Classical music business,
UMG controls publishing rights for an impressive list of traditional classical composers such as Verdi, Puccini, Ravel, Debussy, Stravinsky and many others. The
Production Music Library business owns or controls a vast catalog of original music and arrangements (through numerous libraries and niche brands) and provides
this music for use in films, television, advertising and new media industries, essentially as an economical licensing alternative to live or popular music.
UMG’s combined publishing catalog contains in excess of two million owned and administered titles, including some of the world’s most popular songs, such as
“R.E.S.P.E.C.T.,” “American Pie,” “Strangers in the Night,” “Copacabana,” “Born to be Wild,” “Good Vibrations,” “I Want to Hold Your Hand,” “Sweet Dreams
(Are Made of This),” “I Will Survive,” “Smoke Gets in your Eyes” and “(Sitting on) the Dock of the Bay.” Some of the major artists/songwriters whose works are
represented include Eminem, Justin Timberlake, ABBA, The Mamas & The Papas, Keith Urban, Juan Gabriel, Coldplay, The Beach Boys, Mariah Carey, T-Pain,
Jon Bon Jovi, Maroon 5, Juanes, Gloria Estefan, Linkin Park, Prince, André Rieu, Andrew Lloyd Webber, Ne-Yo and U2. Legendary composers whose works are
represented include Leonard Bernstein, Paul Simon, Elton John, Bernie Taupin, Jimi Hendrix and Henry Mancini. During 2010, UMG entered into a number of new
publishing deals, including agreements with Justin Bieber, The XX, Mumford & Sons, Florence and the Machine, Darius Rucker, Sean Garrett, Desmond Child,
Alex da Kid, DreamWorks, Leon Russell and Jamie Foxx.
In 2010, UMG also acquired Maranatha and Emack Music/Gotee, two seminal catalogs in the Contemporary Christian music genre.
2. Source : Music Copyright.
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2.2.3. Merchandising
UMG’s merchandising division trades as Bravado, a leading company in this business. Bravado is a full service merchandise company with operations worldwide.
It offers its know-how in live event merchandising, retailing and D2C (direct to consumer). It also sells and distributes products via online outlets and operates as
a licensing agent for many of its artists for products such as collectibles, footwear and sports gear. Bravado’s roster of long-term clients includes recording artists
Green Day, Michael Jackson, Led Zeppelin, Nickelback, Katy Perry, Susan Boyle and Queen and renowned brands such as Harley-Davidson, Sesame Street and WWE.
Bravado continues to leverage UMG’s artist portfolio with artists such as Justin Bieber, Eminem, Elton John, Guns N’ Roses, Kanye West, Lady Gaga,
Mariah Carey, Metallica, Rihanna, The Rolling Stones, The Who and Mylène Farmer. In 2010, Bravado entered into partnership with The Bridge Direct to launch
a line of branded merchandise for UMG recording artists, including Justin Bieber dolls and toys. It further expanded its retail footprint by concluding, for example,
an agreement with the Inditex group, one of the world’s largest fashion retailers, to feature UMG merchandise in their fashion chain store Zara.
2.2.4. Seasonality
Music sales are weighted towards the last quarter of the calendar year, when approximately one-third of annual revenues are generated.
UMG’s businesses are subject to the laws and regulations of the countries in which they operate.
In the United States, certain UMG companies entered into a Consent Decree with the Federal Trade Commission (“FTC”) in 2000, under which they agreed that for the
next twenty years, they would not make the receipt of any co-operative advertising fund for their pre-recorded music products contingent on the price (or price level)
at which such products are offered for sale.
In 2003, following a lawsuit filed by the FTC, the FTC issued an order that generally prohibits UMG from entering into agreements with unaffiliated entities to fix,
raise or stabilize prices or price levels for the sale of audio or video products in the United States and any agreements with such entities to prohibit non-deceptive
advertising for audio or video products in the United States.
Also in the United States, a UMG company entered into a Consent Decree with the FTC in 2004, under which it agreed to comply with the provisions of the Children’s
Online Privacy Protection Act and to maintain records demonstrating compliance.
In return for early clearance by the European Commission for its acquisition of BMG Music Publishing, UMG agreed to divest certain limited music publishing assets to
a third party and not to repurchase a direct or indirect interest in such assets for a period of ten years from May 2007. The divestment was completed in February
2008. In addition, following notification by UMG of its acquisition of certain assets of BMG Music Publishing Canada, Inc. under the Investment Canada Act, UMG
undertook with the Minister of Canadian Heritage in April 2008 to regularly attend music events and venues with a view to scouting Canadian songwriter talent,
promote Canadian titles and continue to be an active participant in and supporter of Canadian music publishing.
2.2.6. Piracy
Piracy continues to cause material damage to the music industry while impeding the development of new business models. It is estimated that for every twenty songs
downloaded from the Internet, only one song is legally purchased. UMG takes a multi-pronged approach in response to piracy, working in conjunction with the rest of
the music industry and other entertainment sectors, including the movie and games industries and across sectors via initiatives like the International Chamber of
Commerce’s BASCAP. This multi-pronged approach includes the following:
• UMG supports the launch of new and innovative services, such as Spotify and Vevo, as well as the continued growth of existing services such as iTunes,
giving consumers an increasing number of ways in which to legally access music. SNEP, the organization that represents the recording industry in France,
launched the Youth Card in partnership with retailers and the French government. This offer enables people to buy the card for €25 and buy €50 worth of
music through a range of digital stores. The goal of this initiative is to encourage young people to use legitimate music sites and abandon use of illegal
unlicensed sites.
• UMG works with governments and ISPs to introduce measures to educate users as to the wide availability of legitimate downloading services and which
implement a system of warnings about the use of illegal services. Ultimately, where a user repeatedly ignores the warnings, this system should impose
penalties such as temporary suspension of Internet access. For example, The U.K. Digital Economy Act 2010 aims to combat illegal downloading from the
Internet. By establishing a gradual response process leading to possible sanctions (including temporary suspension of accounts belonging to repeat
infringers), was passed in early April, 2010.
• UMG initiates strategic litigation proceedings against pirate websites. Major developments in 2010 included a judgment against Limewire.
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2.2.7. Competition
The profitability of a recorded music business depends on its ability to attract, develop and promote recording artists, the public acceptance of those artists and the
success of recordings released within a particular period. UMG competes for creative talent with the other major record companies (EMI, Sony Music Entertainment
and Warner Music Group) both for new artists and for those artists who have already established themselves with another label. UMG also faces competition from
independent labels that are frequently distributed by other major record companies. Although independent labels have a significant combined market share, no single
label has material influence over the market. Changes in market share are essentially based on a company’s selection of artists and its release schedules.
The music industry competes for consumer discretionary spending with other entertainment products such as video games and motion pictures. In recent years, UMG
has been facing greater competition for shelf-space, due to declining CD sales and continued consolidation of the retail sector in the United States and Europe.
Finally, the recorded music business continues to be adversely affected by CD-R piracy, home CD burning and illegal downloading from the Internet (please refer
to section 2.2.6 “Piracy” of this chapter).
The principal raw materials used in UMG’s recorded music business are polycarbonates for the production of CDs and DVDs and paper for the packaging of its
products. These raw materials are not subject to price fluctuations that may have a material impact on Universal Music Group’s business. UMG’s business
operations are not dependent on raw material suppliers.
Bravado, UMG’s merchandising arm, is committed to using and promoting products and services that have minimal impact on the environmental, ecological
and social welfare of the planet and its inhabitants.
UMG’s goal is to exploit opportunities for digital distribution and to protect its copyrights and those of its artists against any unauthorized digital or physical
distribution. UMG created eLabs, a new media and technologies division in its structure, which analyzes and studies emerging technologies applicable to UMG’s
operations, such as technological defenses against piracy and new physical formats. UMG has not incurred any material research and development expenses.
2.3. SFR
SFR is France’s leading alternative telecommunications operator. It is a global operator able to assist each person and each company in obtaining the greatest benefits
provided by the digital world.
SFR provides telecommunication services to its customers in Metropolitan France, Réunion and Mayotte via its wholly-owned subsidiary, Société Réunionnaise du
Radiotéléphone (SRR).
As of December 31, 2010, SFR had 21.3 million mobile phone customers and 4.9 million high-speed Internet customers, representing 33.1% of the mobile telephony
market and approximately 23% of the French high-speed and very-high-speed Internet market. (source: ARCEP - The Electronic Communications and Mail Regulation
Authority and SFR data.)
2.3.1. Performance and Services
For SFR, 2010 essentially involved:
• maintaining its leading position in mobile phone subscriptions;
• an innovative rate strategy: bundled offers (“Absolu 24/24”) and rates promoting multiple-device usage (“Multi-Packs”) or the purchase of packages
without new mobile phone devices (“Eco-advantage”);
• an excellent broadband Internet (ADSL) sales performance with a net sales market share considerably above 30%;
• the launch of a new “Evolution neufbox” broadband Internet (ADSL) box that allows SFR to offer two triple-play Internet offers to its customers;
• the acquisition of additional 3G frequencies in June to address the increase in data traffic and Internet access through mobile phones; and
• the decision of La Poste to create a virtual mobile phone operator (MVNO – Mobile Virtual Network Operator) with SFR, in the form of a joint venture.
SFR currently faces the following challenges to its sector:
• increased competition, with the rise of increasingly attractive telephony offers combining fixed-line and mobile phone services;
• preparing the market for the arrival of a fourth mobile phone operator, to be announced in 2012;
• the success of mobile Internet and the need for investment in the mobile network’s coverage and capacity; and
• continuing deployment of fiber-optic networks.
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Mobile
According to ARCEP, in 2010, the mobile telecommunications market continued to expand in France, with a customer base that rose by 2.8 million (representing net
annual growth of 4.6%). As of December 31, 2010, the number of mobile phone customers in France (including Overseas France) totaled 64.4 million and the market
penetration rate was 99.7%, compared to 95.9% as of December 31, 2009.
In 2010, the French market was marked by a strong competitive trend with:
• the development of subscription offerings, relating, in particular, to the migration of customers from pre-paid cards to subscriptions and the success
of locked bundled offers: the share of subscription customers among mobile phone customers in France rose from 69.4% at year-end 2009 to 72.1%
at year-end 2010;
• the continued development of MVNOs within the French market;
• the expansion of increasingly broad bundled offers (voice and data);
• the development of multi-equipment offers for the entire household;
• the explosion of mobile Internet; and
• the commercial availability of the first subscription offers without mobile phone.
In 2010, SFR recorded 1.3 million new mobile phone customers and increased its customer base to 21.3 million, which represents a 4.5% increase over 2009.
SFR’s share of the mobile telephony market in France, excluding MVNOs, was 33.1% (source: ARCEP and SFR) and SFR’s subscriber market share was 34.7%.
Moreover, SFR attracted more than 1.2 million customers to its network through MVNOs. The company has an additional strategic partner in this market: La Poste,
which entered into a joint venture with SFR to create a virtual mobile phone operator, “La Poste Mobile,” with an offer starting in mid-2011.
In 2010, the use of data services continued to grow. At year-end, they represented 27.7% of service revenues, compared to 23.7% at year-end 2009.
Mobile Internet grew substantially, driven by:
• the explosion in the sale of smartphones: at year- end 2010, 28% of SFR customers were equipped (compared to 15% at year-end 2009);
• bundled voice and data offers, such as SFR new “Absolu 24/24” offer; and
• the arrival of touch-sensitive tablets. SFR marketed two models in 2010: Samsung Galaxy Tab and Apple iPad.
SFR achieved a positive performance in the following mobile phone services:
• access to mobile Wi-Fi via more than 3 million SFR hotspots;
• mobile TV-VoD, with over five million subscribers at year-end 2010. The offer includes mobile-optimized content (VoD and content loops and approximately
100 TV channels, 50 of them in the CanalSat package, five in the Canal+ package and 30 in the Pass TV package) and over 20 channels accessible via
mini-passes, such as Sports, Music and News; and
• games, with over 3.3 million pay video games downloaded in 2010 and a selection of over 1,600 games, including over 60 high-definition games.
Fixed-line and Internet
In 2010, the high-speed and very-high-speed Internet market continued to grow in France, with a 1.5 million increase in household customers, representing 7%
annual net growth. The aggregate number of customer households in France (including Overseas France) was 21.3 million at year-end 2010.
In 2010, SFR posted 30.1% net sales (SFR estimates) in the high and very-high-speed market, increasing its customer base to 4.9 million customer households.
This excellent performance was strengthened by the November rollout of the new Evolution neufbox, which attracted over 100,000 customers in the first two
months of becoming commercially available.
In terms of use, the number of TV subscribers to broadband Internet (ADSL) rose from 2.1 million in 2009 to 2.7 million in 2010. This resulted in a sharp increase
in the consumption of pay TV and VoD, with 58 million videos viewed in 2010 (pay, free, subscription or catch-up VoD).
In November 2010, SFR enriched its TV offers on broadband Internet (ADSL) with a play-on-demand service, the first in Europe to use Cloud Gaming (a new way of remote
play using streaming without having to download). The catalog offers approximately 30 high-quality, console-accessible games which do not require downloading.
Businesses
2010 was marked by a strong objective to boost the SFR Business Team to a leading position in terms of customer satisfaction.
The renewal of the Qualicert certificate formed part of this approach, and demonstrates the SFR Business Team’s commitment to end-to-end quality of the fixed-line and
mobile phone services delivered to its customers.
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For the SFR Business Team, 2010 also involved:
• a substantial increase in sales of smartphones, generating an increase in revenue from data options;
• the launch of a cloud computing offer (deportation on remote servers of computer processing usually performed on the user station). This allows companies
to benefit from significant computer processing and storage capabilities through a virtualized and pooled platform, hosted by the SFR Business Team; and
• the expansion of its service catalog to the areas of unified communications and customer relations.
Investments
In 2010, SFR continued investing in its own network infrastructure, particularly in 3G with the HSDPA (High-Speed Downlink Packet Access) and HSUPA (High-Speed
Uplink Packet Access) functionalities. The purpose was to increase available voice capacity and data transfer speed and to offer better quality to customers. In 2010,
SFR’s investment totaled €1,674 million and primarily consisted of investments in networks and information systems and various capital expenditure related to
commercial performance in high-speed Internet. This was combined with approximately €300 million in frequency purchases.
On the mobile phone network, investments yielded an acceleration in coverage and an increase in 3G capacity, as well as a strengthening of EDGE coverage to
address the explosion in mobile data usage. On the fixed-line network, major priorities included a strengthening of unbundled broadband Internet (ADSL) coverage,
increasing capacity with the rise in the number of customers, service quality as well as business services and connections.
In 2010, fiber optic activity focused on continuing to provide connections in buildings (horizontal roll-outs) in Paris, Lyon and Marseille, and accelerating household
connections (vertical roll-outs). In addition, at year-end 2010, SFR signed a co-investment agreement with Bouygues Telecom in densely populated regions.
SFR’s commercial network also improved, with over 7,000 points of sale, including over 800 SFR branches. In 2010, 80% of the population in Metropolitan France
was less than 20 minutes from an SFR facility.
2.3.2. Network
At year-end 2010, the SFR GSM/GPRS network covered nearly 99% of the French population, the UMTS (3G/3G+) network covered approximately 92%, and the
EDGE/3G/3G+ network 97%.
On the 3G network, SFR met its coverage goals set for the 2000-2010 period and increased its capacity to support new mobile Internet uses (data traffic doubled
in one year). It raised the upstream speed (HSUPA) to 2Mbit/s and offers downstream speed (HSDPA) at 7.2 Mbits/s over its entire 3G/3G+ network.
SFR is rolling out its latest changes in 3G+ at the 21-Mbits/s speed bottlenecks. It has also experimented on its Lyon network with a speed of up to 42 Mbits/s.
Of greater importance than speeds, SFR seeks to offer the largest and most convenient mobile phone network. This includes improving Internet experiences,
increasing available capacity and improving transmission links.
Other changes
SFR is pursuing the development of its “femtocell” with a new version (SFR Home 3G) that is cheaper and more powerful. Available in the spring of 2011, it will be
integrated with the Evolution neufbox for greater simplicity.
SFR has over 3 million Wi-Fi access points in France (including in the 50 largest SNCF train stations) and 86 WiMax radio sites in Ile-de-France and Provence-AlpesCôte d’Azur, via SHD (Société du Haut Débit).
In the context of the “France Digital 2012” plan, SFR has launched a satellite Internet access offer under the SHD brand. The rate for this service, which is intended
for areas not yet eligible for high-speed (dead zones) in Metropolitan France, is priced at less than €35 a month.
SFR has continued its development towards the convergence of IP access and services. This data transmission method provides flexibility, upgradeability and security
at the lowest cost. A new switching architecture, based on software services (Softswitch) and R4 technology, has replaced traditional switching methods.
In 2010, SFR continued to develop fiber-to-the-home (“FTTx”) networks, resulting in the fiber connection of approximately 500,000 potential households.
At year-end 2010, SFR had the largest alternative fixed-line network in France, with nearly 57,000 km of high-speed fiber optic cable connecting neighboring countries,
including Italy and Switzerland. This modern capillary network connects 4,000 Subscriber Connection Units (“SCUs”), for more than 23 million unbundled lines. It
provides high-speed data services, including ADSL 2+ and fiber optics, at optimized costs, covering the widest range of the French population among all alternative
operators. It connects 100% of France Télécom’s subscriber switches, allowing SFR to offer Switched Voice services and favorable connection rates.
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Services to local communities
In 2010, LD Collectivités became SFR Collectivités, an entity which contributes to the strategy of rolling out SFR networks and services within the framework of the
needs of local territories and communities. A leader in public initiative networks (PINs), SFR Collectivités is involved in the following:
• Rollout of fixed-line and mobile phone infrastructure networks to enhance the appeal and coverage of the territories, while increasing network speeds;
• Educating about the rolling out of networks among local communities, and the design, construction and operation of telecommunications networks. SFR
Collectivités has also addressed calls for “Investment in the future” projects and, in collaboration with local communities, is involved in developing their
local digital development plans. A close relationship developed through the rollout of 28 high- and very high-speed fixed-line networks in France (including
four in 2010); and
• Partnering with local communities in their plans to develop new digital uses (including solidarity, education, transport and parking).
2.3.3. Seasonality
SFR’s sales (gross customer acquisitions) are driven by significant seasonal variations at year-end. Nearly one-third of mobile phone purchases by customers from the
general public occur in the final three months of the year.
2.3.4. Responsibility, Commitment
In 2010, SFR structured its CSR (Corporate Social Responsibility) effort around three pillars. SFR is promoting a world that:
• is greener: new eco-designed Evolution neufbox, extending the lifetime of mobile phone devices with a new procedure to collect used mobile phone
devices offering greater incentives, and the launch of “Eco-advantage” offers, which rewards customers who wish to keep their mobile phone devices;
• is safer: a reinforced information program for local residents about the installation of new cell relay stations and a guide for parents in the acquisition of
their child’s first cell phone; and
• offers greater solidarity: recipient of the AFNOR Diversity label, attesting to a human resources policy committed to equal opportunity and nondiscrimination (SFR is the first telecommunications operator in France to receive this label), an average of four days of training per year per employee, over
700 SFR employees involved in social-related activities, development of a joint mobile phone offering with Emmaüs Défi, launch of the SFR Young Talents
entrepreneurs (start-up, green tech and social entrepreneurship).
2.3.5.1. Changes in Regulation
In France:
Several important decisions were adopted by ARCEP in 2010, specifically applying to:
• Economic conditions surrounding access to the France Télécom network, which is expected to lead to a major decrease in the access rates for the
operator’s coverage starting from 2011.
• The third cycle of regulation of the mobile phone voice call-termination wholesale markets: Decision 2010-1149 of November 2, 2010 extends current rate
ceilings in Metropolitan France in 2010 (3 c€/minute for Orange France and SFR, 3.4 c€/minute for Bouygues Telecom) over the period from
January 1 to June 30, 2011 and sets new ceilings for the 2011-2012 period for the overseas regions of France. In subsequent decisions, ARCEP will
establish the applicable rate ceilings for the remainder of the three-year period.
• Maximum SMS call termination rate: by Decision 2010-0892 of July 22, 2010 on the definition of the relevant SMS call termination wholesale markets on
mobile phone networks in Metropolitan France and Overseas France, the Authority set the maximum SMS call termination rate billed to third-party mobile
phone operators. This will eventually be raised to one cent of a euro per effective SMS for all mobile phone operators, and specifically as of July 1, 2010
for Orange France, SFR and Bouygues Telecom.
• Authorizations issued to SFR and Orange France to operate the remaining 3G mobile phone frequencies (Decisions 10-0633 and 10-0634, respectively).
• The lifting of the retail market regulation for capacity services, but renewal of obligations imposed on France Télécom relating to the wholesale market
for the terminal segment and on certain inter-territorial and inter-urban segments between Metropolitan France and the overseas departments (Decision
2010-0402).
• The signing, on February 24, 2010, of a framework agreement for the sharing of 3G network facilities for the deployment and extension of coverage to
approximately 3,600 local communities, subject to 2G “dead zone” coverage and 300 additional local communities, by SFR, Orange France and Bouygues
Telecom (joined by Free Mobile in July).
• Authorization granted to Free Mobile on January 12, 2010 to establish and operate a third-generation broadcasting network open to the public; Free
Mobile became the fourth mobile phone operator authorized in France (Decision 10-0043 of January 12, 2010).
“Very high-speed” program
On August 4, 2010 the government launched its national “very high-speed” program, allocating €2 billion to accelerate national very high-speed deployment to cover
100% of households by 2025. The financing gates will be opened in the first half of 2011.
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In Europe:
• “the New Commission” was installed on February 9, 2010, marking the start of a new legislative term that will end on October 31, 2014. Nelly Kroes is now
responsible for digital strategy, Michel Barnier for the domestic market, and Joaquin Almunia for competition.
• since March 1, 2010, European mobile phone operators have been required to provide caps on customer mobile Internet bills in the European Union, under
the European roaming regulation, to prevent them from becoming excessive. Since July 1, 2010, the cap on data consumption abroad has been applied by
default to all mobile phone customers, except those that have expressed a desire not to apply it. The caps applicable to the regulated rates for voice
communications and incoming and outgoing roaming charges in European Union countries were also lowered.
• by adopting a recommendation on September 20, 2010, the European Commission established the regulatory framework for access to new-generation
networks, and in September published a multi-year program plan for the broadcasting spectrum policy currently being considered by the European Council
and Parliament.
The digital dividend and frequencies for very high-speed mobile phone networks
In 2010, ARCEP conducted a public survey on conditions for license awards in the 800 MHz and 2.6 GHz frequency bands, for the deployment of very-high-speed
mobile phone networks. Three criteria were set by ARCEP for awarding these frequencies: digital structuring of the territory, competition in the mobile phone market,
and valuation of the spectrum. ARCEP has set a goal to award frequencies for very high-speed mobile phone devices in the 800-MHz (digital dividend) and 2.6 GHz
(3G extension band) frequency bands by year-end 2011.
2.3.5.2. Health and the Environment
Health
SFR closely monitors the work of international and national experts. In relation to the publication of scientific works, 2010 was marked by the publication of the
consolidated results of the Interphone study 3 , following which the WHO updated its Memorandum No. 193 by stating “to date, no links have been established
between the use of portable telephones and potentially harmful health effects.”
SFR is also involved in a measure to strengthen the dialog among all participants in this effort, through working groups established at the initiative of public
authorities following the “electrical frequencies, health and environment” round table that began in February 2009. In addressing the goals announced for
year-end 2011, implementation of the “Guide for relations between local communities and operators,” signed by the AMF and AFOM, remains the roadmap for the
profession. The work of SFR’s regional technical teams continues.
With regard to mobile phones, the Ministry of Health, the Office of the Secretary of State for Ecology and the Office of the Secretary of State for the Development of
Digital Economy noted in June 2010, on the new inter-ministerial website www.radiofrequences.gouv.fr, that “there is no current scientific proof demonstrating that the
use of mobile telephones presents a health risk. Nevertheless, questions remain on potential long-term effects. The health authorities therefore recommend taking
precautions to limit exposure to electromagnetic fields emitted by mobile telephones and thus propose that easily-implemented actions be taken.”
SFR is thus taking measures to inform its customers, specifically through the mass dissemination of the professional brochure “My mobile phone and my health,”
updated in November (V4) with SIM card kits, both at SFR branches and on the Internet.
More generally, SFR warns users to reduce exposure to electromagnetic waves: use of a pedestrian kit (provided free of charge in all SFR packages), and disclosure of
the maximum exposure levels (DAS) of its phones in its sales brochures, on-shelf displays throughout its distribution network, and on its websites. Digital
communications continue to advance, with the inauguration in April of the new www.mobile-et-radiofrequences.com website, through which SFR seeks to provide
the most educational information possible, and to report more effectively its commitments and actions.
SFR also continued to support research through the “Health and Radiofrequencies” foundation, and to seek new financing mechanisms established by the public
authorities, which will replace the Foundation.
Environment
SFR’s environmental policy is aimed at controlling the environmental impact of its own operations, specifically through an ISO 14001-certified Environmental
Management System, as well as enabling its customers to reduce their environmental footprint.
Thus, in 2010 the ISO 14001 certification was again expanded and currently covers all mobile phone network sites, 12 tertiary sites, two data centers and a mixed site
at Réunion. Through this approach, SFR seeks specifically to control its energy consumption, whether by monitoring and optimizing it in real time, using equipment that
draws less energy, or by experimenting with alternative forms of renewable energy.
3. Gliomas and meningiomas (brain tumors)
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SFR is also committed to a global eco-design approach to reduce the environmental impact of its products, points of sale, and events. In 2010 its desire to make its
customers eco-consumers was demonstrated by:
• new offerings such as “Eco-Advantage,” which allow customers who choose not to replace their mobile phone devices to receive a reduction in their
monthly bills;
• a new recycling procedure which allows customers to exchange their old mobile phones with a purchase voucher at any SFR branch;
• an environmental label informing customers of the environmental footprint of commercially-available mobile phones, and guiding them to choose a more
environment-friendly phone; and
• the launch of the new Evolution neufbox, completely eco-designed, the main environmental impact of which has been reduced by 30% to 50% compared to
the previous generation. Its carbon footprint thus declined from 55 to 36 kg. eq. of CO2.
As of this year, SFR has also sought to anticipate the provisions of the Grenelle de l’Environnement by performing the first global carbon survey, Bilan Carbone ®, of its
operations, based on a process developed by ADEME. This survey will allow it to identify new paths to improvement, and to maximize the benefits gained through
measures that have already been implemented.
SFR is also seeking to develop new environmental value-added services, which will form an integral part of its innovation policy, whether for companies or for the
mass market. Cloud computing, energy management, tele/video conferencing, transport optimization, home automation, remote intervention, e-education and
healthcare, are among several initiatives that offer significant prospects for reducing its carbon footprint.
In this sphere, in 2010, under the auspices of the French Telecommunications Federation, SFR signed a voluntary commitment charter for sustainable development
with the Environment Ministry.
2.3.6. Piracy
SFR seeks to find optimal solutions that address the rights and obligations of all parties affected by piracy issues. In particular, SFR is applying the Hadopi law to
promote the dissemination and protection of creative work on the Internet. The operator has always worked to develop the greatest level of protection, and has
contributed to a number of market innovation initiatives in order to offer its customers a viable alternative to piracy: incorporation of a legal and unlimited music
downloading service in its broadband Internet (ADSL) offer since 2007, and implementation of a legal package for downloading music or videos for its broadband
Internet (ADSL) and mobile phone customers.
2.3.7. Competition
SFR faces fierce competition in the mobile telephony market from Orange France and Bouygues Telecom. Its competitors also include MVNOs such as Virgin Mobile,
Carrefour Mobile, Auchan Mobile and Simyo. The competition continues to intensify in mobile telephony with the impending entry of a fourth mobile phone operator,
Free Mobile, expected in 2012.
The respective market shares held by SFR’s mobile competitors are: Orange France (41.8%), Bouygues Telecom (17.2%) and the MVNOs and other operators in France
(7.9%), compared with SFR’s 33.1% market share (source: ARCEP and operator publications). SFR’s mobile phone network market share, including the MVNOs on its
network, was approximately 35% at year-end 2010 (source: ARCEP and SFR estimates).
SFR’s competitors in fixed-line telephony/high-speed Internet are primarily France Télécom, Iliad (Free) and Bouygues Telecom. Other players are also active in the
market, including the cable operator Numéricable and Darty.
At year-end 2010, the respective market shares of SFR’s high-speed Internet competitors were: France Télécom (43%), Iliad (21%), Bouygues Telecom (4%) and other
Internet access providers (9%), compared with SFR’s 23% market share.
The principal raw materials used in SFR’s businesses are copper for laying cables, petroleum-based polymers for laying fiber optics, steel for the construction of pylons
and paper for the packaging of its products. These raw materials do not represent a sufficient portion of overall costs to have a material impact on SFR’s business.
SFR’s business operations are not dependent on any raw material suppliers.
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SFR’s efforts in research and development were primarily focused on three areas:
• the quality of customer service (fixed-line and mobile phones);
• service platforms and service ergonomics; and
• the exploration of new telecommunications technologies in radio (LTE, fourth-generation network, digital dividend), high-speed access,
the core network and handsets through studies and/or experiments conducted on pilot platforms.
SFR has adopted a network research strategy (academic and industrial) based on collaborative projects. The results of these multi-party collaborations have
generated new patents, particularly in the fields of networks, security and multimedia services.
SFR’s research and development expenditure is estimated at €70 million in 2010, compared to €69.6 million in 2009.
2.4. Maroc Telecom Group
Maroc Telecom Group, the historic telecommunications operator in the Kingdom of Morocco, is active in the fixed-line telephony, mobile telephony and Internet sectors.
Since 2001, during the course of its international expansion, Maroc Telecom Group assumed 51% control of: the Mauritanian historic telecommunications
operator (Mauritel) through the holding company CMC, the Burkina Faso historic telecommunications operator (Onatel) in December 2006, and the Malian
historic telecommunications operator (Sotelma) in July 2009. The deal to take over 51% of Gabon Telecom, which was announced in February 2007 and had
given rise to takeover measures by Maroc Telecom Group since that date, was completed in December 2010.
The operator launched two Mobile Virtual Network Operators (“MVNOs”), named Mobisud in France on December 1, 2006 and in Belgium on May 2, 2007.
It disposed of its interests in these networks to SFR and Belgacom, on May 30, 2009, and June 30, 2010, respectively. It also holds 100% of the share capital
of Casanet, one of the largest Internet access providers in Morocco.
2.4.1. Mobile Telephony
As of December 31, 2010, the Moroccan mobile phone market had close to 32 million subscribers, 96% of whom were under pre-paid plans. At that date,
Maroc Telecom Group held a 52.81% market share, compared to 33.74% for Méditel and 13.45% for Wana (source: ANRT).
Maroc Telecom Group’s active mobile phone consumer base consists of 16.9 million customers, representing an increase of 10.6%. This growth was due to positive
performance in all sectors:
• 10.2% improvement in pre-paid customers, with a decline of 4.2 points over the year in the cancellation rate; and
• 20% increase in the mobile post-paid customer base.
The pre-paid service has shown sustained growth since its introduction, largely due to the decline in retail prices, the sale of packages that include a GSM device
at relatively low prices, and various recurring promotions launched by Maroc Telecom for reloads and communications. This stimulated consumption and promoted
retention of the customer base.
2010 was marked by the third-largest operator’s launch of its GSM 2G mobile phone offers, named Tic Tac. On that occasion, Wana changed its brand name,
and is now known as Inwi. It is distinguished by its per-second rate system.
Despite the competition, Maroc Telecom has succeeded in significantly reducing its cancellation rate (which has fallen by 4.5 points, to 29%), through efforts taken
to increase customer loyalty while pursuing an acquisition policy to increase its customer base.
In the post-paid sector, Maroc Telecom continued to promote its unlimited calls option while reducing tariffs, increasing flat-rate periods and introducing new services.
In the Internet 3G+ sector, after extending access to all its pre-paid and post-paid customers, Maroc Telecom continued its policy of acquiring and retaining customers
by voluntarily lowering rates, increasing speeds and multiplying the number of promotional offers.
Value-added services represent a major challenge to the Group, since they must show a viable opportunity for growth in ARPU. They have been given particular
attention in terms of development. In 2010, the range of these products was significantly enhanced with the launch of new, state-of-the-art services: Windows Live
Messenger, Blackberry on demand, USSD home page and access to the 160 information number. Thus, mobile phone revenue from outgoing services excluding voice
increased by 25% in 2010, accounting for 10.5% of average billings, compared to 8.7% during the previous year.
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2.4.2. Fixed-line Telephony, Data and Internet
The main fixed-line telecommunications services provided by Maroc Telecom Group include:
• telephony services;
• interconnection services with national and international operators;
• data transmission services for professional customers and Internet service providers, as well as for other telecom operators;
• internet services (including Internet access services and related services such as hosting); and
• television via broadband Internet (ADSL).
The Group’s fixed-lines marginally declined in 2010, to an aggregate of 1.231 million at year-end 2010, representing an overall decrease of 0.2% (the decline was 5%
in 2009). The development of a stable customer base was achieved through marketing and sales efforts in 2010, particularly the decrease in call termination rates
from abroad to fixed-lines, which contributed to retaining the customer base. As a result, Maroc Telcom Group posted both increased subscriptions (an increase of
approximately 13%) and fewer cancellations (a decline of 16%), resulting in an improved churn rate.
The Internet market continued to develop in 2010, with the stabilization of broadband Internet (ADSL) and strong growth in 3G+ mobile Internet.
The Internet customer base has attracted 26,000 new customers in 2010, representing a 5.4% increase. This growth was triggered by the provision of doubled
Internet connection speeds and a reduction in applicable rates as of year-end 2009.
Maroc Telecom holds a substantial position in the broadband Internet (ADSL) market, which represents 26.65% of the Internet access market, with a market share
of over 99% (source: ANRT).
At year-end 2010, the number of business and corporate subscribers in Morocco was approximately 403,000. Maroc Telcom Group’s share of this market was 93.53%
of lines, compared to 4.19% for Méditel and 2.28% for Wana (source: ANRT).
As of December 31, 2010, the aggregate public phone customer base (including all operators and technologies) was over 181,000 lines, representing a rise from 2009.
Maroc Telecom Group’s market share in public phones was 80.18% of lines, compared to 19.82% for Méditel (source: ANRT).
2.4.3. Distribution
Maroc Telecom Group has the largest distribution network in the country, with a direct and indirect network consisting of over 71,000 points of sale.
In 2010, Maroc Telecom Group’s various distribution channels were structured as follows:
• a direct network, with 349 sales offices. This network is in full development and each year new offices are created and old ones realigned;
• a local indirect network consisting of independent resellers which are subject to exclusivity agreements and managed by the nearest Maroc Telecom
Group sales office. A major portion of these resellers operate phone stores; and
• an independent local network consisting of retailers with nationwide and regional networks, which is formed of distributors structured nationally whose
main business activity is not telecommunications (supermarkets, newspaper and magazine retailers, tobacco shops or Moroccan post offices).
2.4.4. Network
Maroc Telcom Group’s fixed-line network consists of a transmission base, switching centers, service platforms and an access network.
As of December 31, 2010, Maroc Telecom Group had approved 519 roaming agreements with partner operators based in 214 countries, allowing it to offer connectivity
to every country in the world through two international transit centers (Casablanca and Rabat) and four underwater fiber-optic cables (SMW3, Tetouan-Estepona,
Eurafrica and Atlas Offshore, which Maroc Telecom Group has owned since 2007).
Its international Internet bandwidth has also increased from 48 Gbps at year-end 2009 to 60 Gbps at year-end 2010.
The mobile phone network is based on GSM technology deployed throughout almost the entire territory. It consists of a developed infrastructure, significant
international connectivity, and service quality of a level comparable to that of international operators. This 2G GSM network is supplemented by a 3G/HSDPA
network offering all multimedia-type third-generation services (video-conferencing, streaming, downloading, online games, etc.) at a maximum theoretical speed
of 7.2 Mbits/s, including high-speed Internet access by mobile USB key.
Maroc Telecom Group network allows coverage of virtually the entire population (98.4% at year-end 2010) through approximately 6,500 2G base stations and some
3,000 3G stations.
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2.4.5. Mauritel
Maroc Telecom Group holds 51.5% of Mauritel, via the CMC holding company, which holds 80%.
Mauritel provides fixed-line telephony services (voice and data) and Internet access, to private customers as well as to companies and government entities.
It is the leading operator in this market with a market share of 55% as of September 30, 2010 (source: Dataxis).
Fixed-line telephony customers accounted for 41,000 lines at year-end 2010, amounting to a decline of 1.1% from 2009. This reflects increased competition between
fixed-line and mobile phone activities in Mauritania. The penetration rate was limited to 3% as of September 30, 2010 (source: Dataxis).
Besides Mauritel, Société Mauritano-Tunisienne de Télécommunications Mattel and Chinguitel have obtained fixed-line licenses since 2009, allowing them to
be active in this market. However, the former has not, to date, developed either networks or fixed-line offers, while the latter is providing its fixed-line services
through its CDMA network. Mauritel thus remains the sole fixed-line operator in Mauritania.
As of December 31, 2010, Mauritel had 7,000 Internet subscribers, up 3.3%, largely connected via the broadband Internet (ADSL) network.
In the mobile phone market, two operators are active alongside Mauritel: Mattel and Chinguitel (since August 2007). Mauritel’s mobile phone customer base,
the majority of which is pre-paid, grew at an annual rate of 17.4% to an aggregate of more than 1.5 million customers as of December 31, 2010. This allowed it
to achieve a market share of 54% as of September 30, 2010, a three-point increase compared to year-end 2009 (source: Dataxis). It was assisted by a favorable
rate and promotional policy (example: commercial availability of pre-paid cards with communications billing by the second) and the launch of value-added services
increasingly adapted to each type of customer.
2.4.6. Onatel
Maroc Telecom Group holds 51% of Onatel, which in turn holds 100% of its mobile phone subsidiary Telmob.
The extraordinary shareholders’ meeting of Onatel SA held on December 29, 2010 approved the proposal to merge Onatel with Telmob. Since then,
Onatel has become a global operator benefiting from the pooling of all its fixed-line, mobile phone and Internet activities.
As of December 31, 2010, Onatel had a fixed-line customer base of 144,000 lines, down 5.6%. The fixed-line penetration rate as a proportion of the population
still remains low, at only 1.1% as of September 30, 2010 (source: Dataxis).
During the same period, the Internet customer base exceeded 28,000 subscribers, amounting to a sharp increase of 24% since 2009).
As of September 30, 2010, the mobile telecommunications penetration rate in Burkina Faso was 28% (source: Dataxis). The market is divided among three operators:
Onatel, Airtel (formerly Zain) and Telecel Faso. Onatel’s mobile phone customer base was close to 2.4 million customers as of December 31, 2010. This represents an
approximate customer increase of 53% year-on-year, almost all of whom were pre-paid. This performance allowed it to further improve its market share, to 45% as
of September 30, 2010, compared to 42% the previous year. Onatel thus further strengthened its leading position in 2010, through promotional efforts, service quality
and network coverage.
2.4.7. Gabon Télécom
Maroc Telecom Group holds 51% of Gabon Télécom, the historic operator in Gabon. Gabon Télécom is composed of Gabon Télécom and its wholly-owned
subsidiary Libertis.
Gabon Télécom is currently the only fixed-line phone operator in Gabon. However, in the Internet and VSAT markets, other access providers operate alongside it. As
of December 31, 2010, the operator had a fixed-line customer base of 27,000 lines (wired and CDMA), amounting to a decline of 27%, due to fierce competition from
mobile phone services and efforts to improve base reliability. Thus, the fixed-line penetration rate as a proportion of the population remained low at only 2.4% as of
September 30, 2010 (source: Dataxis).
Gabon Télécom also offers Internet access via its wired network (specifically high-speed broadband Internet (ADSL)) and its CDMA network. As of December 31, 2010,
Gabon Télécom thus had 22,000 Internet subscribers, amounting to an increase of 9.6%, allowing it to retain its existing fixed-line customer base while implementing
a policy of increasing its average billings.
The mobile penetration rate was 111% at as of September 30, 2010 (source: Dataxis). The market is divided among four operators: Gabon Télécom, Airtel (formerly
Zain), Moov and Azur (network launched in mid-2009). In this context, Gabon Télécom consolidated its number-two position with a market share of 37% as of
September 30, 2010, representing an increase of four points since the beginning of the year. A call for tenders was made in 2010 for 3G licenses, but they have not
been awarded to date.
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Gabon Télécom‘s customer base was 699,000 as of December 30, 2010, amounting to an increase of 36% on an annual basis and consisting primarily of all pre-paid
customers. This performance was due to the development of a marketing strategy adapted to the changing needs of the market, specifically through targeted
promotions and the increasingly dense mobile phone network.
2.4.8. Sotelma
Maroc Telecom Group holds 51% of Sotelma, the historic operator in Mali. To date, Sotelma is the most active operator in the fixed-line market.
As of December 31, 2010, the operator had a fixed-line customer base of 79,051 lines, up 22%, specifically due to the development of CDMA technology allowing
it to quickly cover the territory at the lowest cost. The fixed-line penetration rate as a proportion of the population still remains low, however, amounting to only 0.6%
as of September 30, 2010.
As of December 31, 2010, Sotelma had 20,000 Internet subscribers, representing a sharp rise of 167%. The market is split between two operators with 2G and 3G
licenses: Orange and Sotelma.
The Sotelma mobile phone customer base totaled 2.2 million as of December 31, 2010 (almost all of them pre-paid), amounting to an increase of 164% on an annual
basis, due to significant investment in the extension of network coverage to new locations and to concentration in the major cities. This deployment, as a result of
new infrastructure (the number of base transceiver stations was doubled), combined with active marketing, allowed Sotelma to achieve a market share of 31% as
of September 30, 2010, compared to 19% at year-end 2009.
2.4.9. Seasonality
In Morocco, revenues traditionally increase with the return of Moroccans who live overseas for the two-week period preceding Aïd El Adha (November 17th in 2010)
and in the summer months (primarily in mobile and public telephony). The month of Ramadan is a low point in consumption for both fixed-line and mobile telephony.
In Mauritania, there is generally strong activity from June to September. Other shorter periods offer major sales opportunities, such as religious celebrations. During
the Ramadan period, fixed-line and mobile phone usage is at a low point.
In Burkina Faso, there is generally a high level of rainfall during the months of August and September. This has a negative impact on commercial operations and the
quality of network service, and has repercussions on revenue, both in the fixed-line and mobile phone sectors.
In Gabon, December and the summer months (July to September) are periods of very high activity, following the year-end celebrations (Christmas and St. Sylvester’s
Day), the start of holidays in the country, family ceremonies, the celebration of independence and the start of the school year. However, the opposite of these peaks
is observed in November, January and February.
In Mali, during the rainy season from June to September, the arrival of a substantial number of Malian students on holiday in the country contributes to a rise in
telecommunications activity. Other short-term events also offer opportunities for very significant sales: religious holidays such as Tabaski (generally the day of the
holiday and the following days) and the year-end celebrations (December). However, with the exception of the last days of Ramadan, which coincide with the holiday,
this month results in a major decline in mobile and fixed-line traffic.
In Morocco, the National Telecommunications Regulatory Agency (ANRT) carries out research and implements regulations involving the telecommunications sector.
It also ensures that operators comply with applicable regulations. To this end, the ANRT prescribes and implements procedures for the award of licenses through
tendering processes, manages and oversees the range of electric frequencies, controls the rates of major operators with a material influence on a relevant market
and verifies that operators comply with fair competition conditions in the market. Finally, its mission includes settling disputes relating to interconnection and
infrastructure sharing.
As set out in a policy paper for the 2004-2008 period, regulation of the telecommunications sector in Morocco resulted in the award of two fixed-line telephony
licenses, three third-generation (UMTS) network licenses, and a third second-generation mobile phone license, as well as the implementation of major regulatory
levers, i.e., for unbundling, phone number portability and carrier pre-selection.
The second policy paper, covering the period up to the end of 2013, was approved by the ANRT Administrative Council at its meeting of January 19, 2010 and made
public on February 25, 2010. The principal regulatory measures prescribed in this paper are the following: infrastructure sharing, elimination of unbundling rates,
improvement in current portability times, major reduction in interconnection rates with the introduction of temporary asymmetry up to 2013, and the strengthening
of control over retail offerings and promotions.
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Maroc Telecom Group fulfills its obligations as a fixed-line and mobile phone operator providing universal service in compliance with contract specifications.
In Morocco, universal service obligations include telecommunication services that comprise phone services under specific quality standards at affordable prices.
It also includes services permitting Internet access, the forwarding of emergency calls, and the provision of an information service and a directory in printed or
electronic form (the two latter services being mandatory). A public phone service consisting of booths installed on public streets must also be provided.
Maroc Telecom Group is required to dedicate 2% of its revenues, excluding tax and interconnection fees, to its universal service obligations by applying the
pay-or-play principle, which offers a choice of paying all or part of its contribution to the universal service fund and/or creating programs approved by the universal
service management committee.
For the years 2008-2011, the ANRT has issued a call for tenders to all national operators to undertake a vast universal service program entitled “PACTE,” aimed at
covering all the dead zones in Morocco in phone and Internet access services, i.e., 9,263 locations. The Universal Service Management Committee has appointed
Maroc Telecom Group for 7,338 of them, for an aggregate of €104 million, to be deducted from its universal service contribution for the years 2008-2011.
2.4.11. Competition
As of the date of this report, 19 telecommunications operator licenses have been granted in Morocco:
• three public fixed-line telecommunications network operator licenses (Maroc Telecom Group, Médi Télécom and Wana/Inwi);
• three GSM operator licenses (Maroc Telecom Group, Médi Télécom and Wana);
• three UMTS licenses (Maroc Telecom Group, Médi Télécom and Wana);
• five licenses to operators of GMPCS-type satellite telecommunications networks;
• three licenses to operators of VSAT-type satellite-based telecommunications networks; and
• two licenses to operators using shared resources of radio electric networks (3RP).
2.4.11.1. Fixed-line Telephony
Operators holding the two new fixed-line licenses launched their services in 2007. However, competition already existed in the public telephony market sector
and the business sector before these new licenses were granted.
In the public telephony market, competition started in 2004 with the opening of phone stores using GSM technology by Médi Télécom. At year-end 2010,
Maroc Telecom Group’s share of the public telephony market represented approximately 80.18% of lines (source: ANRT).
Médi Télécom entered into the business fixed-line market through the installation of GSM gateways, also known as Link Optimization Boxes (“LO Boxes”).
The installation of this equipment for outgoing PABX lines facilitates the transformation of fixed-line-to-mobile traffic into mobile-to-mobile traffic without
using Maroc Telecom’s fixed-line network. At year-end 2010, the market share of Maroc Telecom Group in this sector was approximately 93.53%.
In data transmission services, there is competition among Internet Service Providers (“ISPs”), satellite operators and Equant, an international operator.
Users of Wana/Inwi’s limited mobility services through Code Division Multiple Access (“CDMA”) technology totaled close to 2.5 million customers at year-end
2010 (source: ANRT).
2.4.11.2. Mobile
Maroc Telecom Group’s main competitor in this sector is Médi Télécom, which holds a mobile phone license since 1999. France Télécom has held a 40% interest
in Médi Télécom since September 2010.
In June 2008, Wana, a 3G license holder, introduced its mobile phone offerings using CDMA technology. In February 2010, Wana (now called Inwi) launched Inwi,
its new telephony brand with a GSM network covering three-fourths of the Moroccan population.
At year-end 2010, Maroc Telecom Group held 52.81% of the mobile phone market, a 7.5 basis-point decrease from year-end 2009 (source: ANRT).
2.4.13.3. Internet
Maroc Telecom Group holds 56% of the Internet market (all access methods combined). Its main competitors are Inwi with a market share of 29.86%, Médi Télécom,
with a 14% market share, and other ISPs (source: ANRT). Maroc Telecom Group has a very strong position in the broadband Internet (ADSL) market, with a market
share of over 99% (source: ANRT).
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The principal raw materials used in Maroc Telecom Group’s operations are copper for laying cables, petroleum-based polymers for laying fiber optics, steel for the
construction of pylons and paper for the packaging of products. These raw materials do not represent a sufficient portion of overall costs to have a material impact on
the business of Maroc Telecom Group. Its business operations are not dependent on any raw material suppliers.
Maroc Telecom Group has a research and development department that designs and engineers its products. This research generally focuses on the launch of new
products and/or services as well as the development or improvement of existing products; these operations do not constitute inventions or processes with the
potential to be patented. Improvements made to a protected invention may be subject to filing with a view to their protection by an instrument known as a certificate
of addition, the filing requirements of which are identical to those of the main patent.
Each year, Maroc Telecom Group launches an innovation contest for its employees, aimed at recognizing the best ideas or projects, specifically in commercial and
technical sectors where the company is experiencing gaps in terms of the filings of patents, trademarks or models.
Maroc Telecom Group has not incurred any material research and development expenditure.
2.5. GVT
GVT is the leading alternative telecommunications operator in Brazil. In late 2000, GVT began its operations as the second operator, or a mirror company to the local
incumbent in Region II, which, as determined by ANATEL (Brazilian Telecommunications Agency, which promotes and develops telecommunications), consists of the
Federal District (Distrito Federal) and nine states in the Midwest and South of Brazil as well as certain states in the North.
Currently, GVT operates in 97 Brazilian cities of all regions including Region I (Rio de Janeiro and Northeast) and Region III (São Paulo). The company has licenses
to operate all types of telecommunications services nationwide.
GVT continues to pursue a strategy of growth by expanding its network coverage and territorial reach in other additional key markets located outside Region II,
creating a national presence in all population areas of Brazil. In 2010, the company launched operations in 13 cities outside its original region and is currently planning
to launch its network in additional cities in 2011, including the cities of Rio de Janeiro and Sao Paulo, the two biggest Brazilian markets. Its results from operations in
cities outside Region II represent an increasingly significant portion of GVT’s overall results, including total revenues and lines-in-service (LIS).
GVT is the fastest growing telecommunications service provider in Brazil in terms of revenue and Adjusted EBITDA4. The company’s Compounded Annual Growth
(CAGR) over the period 2006-2009 is 30% for Revenue and 37% for Adjusted EBITDA4. In 2010, these indicators indicated a rise of 43% in revenues growth and a rise
of 53% in EBITDA. GVT offers innovative bundles at very competitive prices, is the only operator in Brazil to deliver up to 100 Mbps speed for broadband to the retail
market and has the highest quality of service for all market sectors: i.e., Retail/Small to Medium Enterprises (“SME”) and Corporate.
GVT is considered to be the most established and well-recognized alternative to the fixed-line incumbents (the “Incumbents”) in the Brazilian market, enabling it to
continue to gain market share from its main competitors in its current areas of operation, as well as in new areas where it launches services. In 2010, GVT captured an
average market share of approximately 22.2% of the voice and broadband market in the 97 cities where it operates.
2.5.1. Products and services
GVT offers comprehensive and advanced telecommunications services to markets that range from large, stable sectors with strong cash flow generation (such
as conventional telephony) to high-growth sectors (such as broadband, Internet services, VoIP, and, from the second half of 2011, Pay TV using satellite and IPTV
technology). This approach allows the company to target a broad market and offer one-stop shopping for all fixed-line telecommunications, Internet and pay-TV
services that its customers require. GVT’s presence across different markets with diversified products and customer segments helps stabilize its revenues and
reduces its exposure to any one end-user application or customer. It continues to offer flexible bundles at competitive prices for comparable products and services
offered by its main competitors, while at the same time increasing its margins over the preceding years.
GVT develops bundles of diversified products into an integrated package to attractive different customer segments. GVT bundles conventional telephony,
broadband Internet, value added services, services and content over broadband, managed services, corporate data, VoIP-based products in packages offered
to its customers enabling it to generate higher revenues per customer and a higher return on invested capital, while building strong customer relationships
and a high level of customer engagement.
4. Adjusted EBITDA, the performance index used by GVT management, is calculated as follows: earnings from operations, before tax, revenues, profits, expenses, interest, amortization, depreciation, and profits after
asset transfers or charges related to stock options.
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In 2010, GVT continued to introduce new products and services. In April, the company launched the Premium family, which offers more than eleven thousand
minutes of local, mobile and long distance calls, with higher margin and ARPU (Average Revenue per User). At year-end 2010, 25% of the customer base was
already using Premium.
Protect launching, a security package of services with online back up, parental control, anti-spyware and anti-virus was launched in May. As of December 31, 2010,
9.6% of its customer’s base was already using this service with GVT ultra speed Internet. GVT’s strong client relationships and commitment to its customer base
explains the record levels attained in the use of its products and services: i.e., 90% of its customers select a GVT long distance code to place long distance calls
and 88% of the retail customers use GVT broadband.
The company’s new broadband generation, unlike the one of the Incumbents, delivers ultra-high speeds of up to 100Mbps at affordable prices with excellent
cost-benefit rates. As the market shifts dramatically towards broadband and increasingly turns away from conventional telephony, GVT’s competitive strengths
are expected to continue to grow. In 2010, GVT reduced the price of its 15Mbps broadband, turning it in the main portfolio speed. Sales of GVT’s 15Mbps broadband
service grew from 7% to approximately 50% after the new price. The usage of 10Mbps and above broadband speeds reached 64% of the broadband base by
year-end 2010.
With the new price, the company also changed the lower speed offered from 3Mbps to 5Mbps, the highest entry broadband speed in the Brazilian market. In addition,
GVT launched the Power Music Club, in partnership with Universal Music, the company’s initial move towards offering content over broadband.
GVT is committed to continuing to offer exceptional customer service, which differentiates the company from the other Brazilian telecommunication and
Internet operators.
As a result of the new regulation relating to number portability, GVT continues to gain market shares from the Incumbents, and has the ability to cross-sell
the company’s other services. In the third quarter, GVT’s ratio of phone numbers transferred into its network to numbers transferred out of its network was
approximately 11:1. The accumulated ratio since 2008 was approximately 8:1.
2.5.2. Retail/Small and Medium Enterprise (SME) Segment
GVT’s Retail/SME segment offers local and long distance fixed-line-telephony and broadband services to high-end and high-margin residential customers and
SMEs with a significant last mile network. GVT also offers long distance services to customers holding lines supplied by other operators in cities in which it does
not have a local presence. In addition, GVT’s Retail/SME segment offers Internet services through POP, its ISP, which includes dial-up and broadband connections.
GVT also offers content, e-mail and other multimedia services such as blogs, photoblogs and hosting services to its customers, regardless of whether these customers
also purchase Internet access services from the company. In addition, GVT offers VoIP services through VONO to residential and SME customers in Brazil, as well
outside of Brazil, who have a broadband connection with any operator.
2.5.3. Corporate Segment
GVT’s Corporate segment focuses on middle-to-large companies that are underserved by the Incumbents. It provides superior and innovative products and services
of the highest quality. It offers high-quality integrated solutions and managed services that include conventional telephony, Internet services, private-data networks,
hosting and VoIP services. With the Sao Paulo and Rio de Janeiro launching of Retail services in 2011, the Corporate Segment should benefit with higher margins
because the current customers in these cities are expected to migrate to the network.
GVT benefits from having the most advanced NGN architecture to provide customized solutions based on conventional telephony and IP technology. It offers unique
value propositions to customers through greater functionality and substantially lower operation costs and capital expenditure.
2.5.4. Network
GVT’s network is the most modern in Brazil. It includes one of the most extensive local access networks and long distance fiber infrastructures in the country, which
supports its leading position in the NGS market and allows the company to expand its presence nationwide.
GVT has designed its network using state-of-the-art technology that is feature-rich and capable of supporting the growing market demand for a wide range of
telecommunications, high-speed broadband and multimedia services.
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The core network is conceived around a NGN architecture, a hybrid ATM (Asynchronous Transfer Mode) and IP infrastructure, which provides the company with
unique, more flexible, faster time-to-market integrated services including telephony, voice, data, VoIP and video. Moreover, in operational terms, this packet-based
core infrastructure is highly cost effective. GVT’s access network solution is unique in the Brazilian market, since it is based on a FTTN (Fiber-to-the-Node) network,
which combines metropolitan fiber optic rings and short copper lines, with a maximum length of 1.5 kilometers and an average length of 400 meters. In the new cities,
such as Sao Paulo and Rio de Janeiro, the company is building an even shorter copper network with 200 meters between the street cabinets and the households.
The proximity of this network to customer premises enables superior quality and higher bandwidth services of up to 20Mbps with the current ADSL2+, 50Mbps with
VDSL2 technology (limited to 800 meters) and 100Mbps with EFM (Ethernet First Mile, which is Active Ethernet using fiber drop directly from a street cabinet to the
customer’s premises).
GVT has 40,266 kilometers of cable (fiber + copper network) in metropolitan areas and 120,992 buildings connected. In addition, GVT’s long distance fiber network has
18,000 route kilometers, which covers 77% of its traffic demand as of December 31, 2010.
2.5.5. Seasonality
GVT’s business is based on subscription contracts made-up of a monthly fee for fixed-line telephony and broadband services which represent 74% of its total
revenues. The remaining 32% results from the use of services charged by the minute, which decreases during holidays and the summer season.
GVT’s business is subject to comprehensive regulation under Brazilian law. The adoption of new telecommunications service regulations and the privatization of
Telebras’ Subsidiaries (the Brazilian government-owned telecommunications operating companies) in 1998 led to broad changes in the operating, regulatory and
competitive environment for Brazilian telecommunications. The Brazilian telecommunications regulatory framework is constantly evolving.
The General Grant Plan (“Plano Geral de Outorgas – PGO”), approved by Decree No. 2,534 on April 2, 1998, organizes the Brazilian territory into four Regions for
providing fixed-line telephony services (“Serviço Telefônico Fixo Comutado – STFC”) as follows:
• Local Telephony Service – 3 Regions:
Region I, composed of states in the Southeast (except São Paulo), Northeast and part of the Northern regions;
Region II, composed of states in the South and Center-North and part of the Northern regions; and
Region III, composed solely of the state of São Paulo.
• Long-Distance Telephony Service – 1 Region:
Region IV, composed of national and international long distance operations.
Concessions to provide telecommunications services are solely granted by ANATEL under a public service regime, while authorizations are granted under private law only.
Under the public service regime, concessionaries are subject to obligations relating to quality, continuity of services, universal services, network expansion, and are
under the supervision of ANATEL relating to the fees they charge. Under this regime, all the properties, including network, systems or equipment, used to provide
STFC may be appropriated by the Brazilian Government at the end of the concession period, so that the State may continue to provide the relevant services. Under the
private regime, authorized providers are not subject to the universal service and continuity of service obligations. Therefore, if an authorized company ceases to
provide services, the federal government shall not be under the obligation to provide such services. There are no restrictions on prices under the private law regime,
and providers are only subject to the general laws and principles that prohibit anti-competitive cartel conduct. Under the private regime, the state is not permitted to
appropriate assets used for the provision of services.
Obligations related to the quality of services, the interconnection and compensation for the use of networks apply to telecom service providers both under the public
and the private regimes. GVT started its operations in Region II where it was the first company under the private regime to be authorized by ANATEL and to compete
with the already privatized Incumbent, thereby transforming the existing monopoly into a duopoly. In 2002/2003, GVT obtained STFC licenses to operate in São Paulo,
Rio de Janeiro and Belo Horizonte capitals. In November 2006, the company received STFC licenses for Regions I and III, resulting in nationwide coverage for all of
Brazil. In December 2010, GVT received a DTH (Direct to Home) license to broadcast TV by satellite technology. This will enable GVT to combine offers using IPTV
technology with its interactive and managed services.
One of GVT’s competitive advantages is its ability to obtain favorable license terms. Unlike that of its Incumbents’, GVT’s license terms are not subject to price caps or
universal service obligations, thereby enabling it to focus on network coverage and marketing efforts within the most profitable geographic areas and towards the
most lucrative businesses and retail customers. GVT’s license terms also allow it to manage its cash flow in an efficient manner as it is able to target its expansion
only in areas and cities that meet its very strict financial criteria for return on investment and cash flow metrics and to adjust its capital expenditure accordingly.
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GVT currently operates under the following licenses, each covering all of Brazil:
• local Telephony Authorization License;
• national Long Distance Authorization License;
• international Long Distance Authorization License;
• multimedia Communication Services Authorization License (“Serviço de Comunicação Multimídia – SCM”); and
• direct to Home License (DTH) for Pay TV.
In 2008, ANATEL implemented new rules regulating phone number portability, whereby customers can keep their phone numbers when changing carriers, provided
that, in the case of fixed-line phone services, the change is made within the same local area, and, in the case of mobile phone services, the change is made within the
same area of registration (i.e., within the same area code). In fact, this development benefits GVT as it eliminates a barrier the company had formerly experienced
when acquiring customers. GVT is the leading company in fixed-line telephony number portability with 58% of the activation numbers in cities where it is present.
ANATEL approved regulation for Mobile Virtual Network Operators (“MVNO”) for public consultation. According to the proposed regulation, there will be two
alternative models: Reseller or Virtual Operator. The latter requires investment in commercial infrastructure in order to be able to operate the mobile phone service.
This will provide an opportunity for GVT to continue exploring the possibility of entering into partnerships with other major mobile phone companies, who could act as
an MVNO company. This would enable GVT to increase the scope of its current customer base.
Under current regulation, GVT, as is the case for other telecom operators, is not permitted to provide pay-TV services. However, a draft law bill (PLC 116) is currently
being considered in Congress to enable telecom operators to provide such services and is expected to be approved during 2011. Despite the regulation, GVT will
launch in the second half of 2011 its Pay TV using a hybrid solution with satellite (DTH license).
2.5.7. Competition
GVT faces different forms of competition based on the various markets in which it operates:
2.5.7.1. Retail/SME Segment
Local Telephony Market
Throughout Region II, its main competition in the local telephony retail market is from the Region II Incumbents, Brasil Telecom (and Sercomtel in the city of Londrina)
and NET Serviços de Comunicações S.A. (“NET”), the largest cable TV operator in Brazil.
Indeed, as part of its cable television package aimed primarily at the residential market, NET offers broadband access and a VoIP line that includes a local phone
number. NET has a presence in all major cities in Brazil and in all three regions. NET is partially owned by Telmex, the controlling shareholder of Embratel and Claro.
Since GVT launched its operations in the cities outside Region II, it also competes with the local Incumbent in these areas, including Telemar/Oi, the Incumbent of
Region I. At the beginning of 2009, Telemar/Oi acquired Brazil Telecom’s operations, consolidating both companies under the brand “Oi.” Oi’s networks cover all cities
in Regions I and II and almost the entire population due to their universal obligation. In the second half of 2010, Portugal Telecom announced the acquisition of a 20%
interest in Oi. It is expected that the transaction will close in the first quarter of 2011.
Telefonica, the Incumbent in Region III, acquired the mobile telephony company Vivo in 2010, making it a multi-service company offering fixed-line telephony, mobile
telephony, broadband Internet and TV services.
Long Distance Telephony Market
The long distance market is fragmented among numerous companies and is based on the call-by-call carrier selection method, making it the most competitive market
segment. The local Incumbent for each respective region holds the leading position in the long distance market within its relevant customer base, primarily due to the
competitive advantages of having a physical interconnection, billing and collection with its customer base.
GVT competes in the long distance market in two ways: acting as a local carrier when serving its customer base and as a long distance provider for non-GVT
customers. As of December 31, 2010, its long distance market share within its customer base was 90%. This market share is calculated by dividing the aggregate
minute usage of its long distance code by the total long distance minutes used by its customers. GVT does not intend to actively compete with the Incumbents in
providing long distance services to their local customer base due to the low margins generated by this service.
Broadband/ISP Market
In the broadband and Internet services market, there are a number of competitors in addition to the Incumbents. GVT’s primary competitor, after Oi and Telefonica, is
NET. In addition, mobile phone companies offer mobile broadband for fixed-line usage, although they are not able to offer competitive services in terms of price and
speed compared to GVT’s fixed-line broadband. However, as the Incumbents do not offer broadband services in many areas and offer low-quality broadband services
in some areas, mobile broadband is rapidly increasing in the country.
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2.5.7.2. Corporate Segment
In the Corporate segment, GVT operates in 97 cities, including the metropolitan areas of São Paulo, Rio de Janeiro, Belo Horizonte, Campinas, Santos, Salvador, Vitória and
Recife. GVT’s main competitors in that segment are the three Incumbents: Oi, Telefonica and Embratel (Telmex). In each of the three regions, the strongest competitors are
the local Incumbent for that region and Embratel. In addition, there are other niche players, such as Diveo, Global Crossing, Transit, CTBC and Intelig (TIM).
The raw materials used in GVT’s business are copper used to enable customer access as well as for access to equipment and fiber optics used to build long-distance
networks and subway rings.
GVT is recognized as an innovative telecommunications company offering its customers high quality services and a broad portfolio of superior and innovative products
and services. However, GVT does not have a Research and Development department nor did it have any research expenses in 2010.
2.6. Canal+ Group
2.6.1. Pay-TV in France
Canal+ Group is the largest pay-TV group in France. It is a leading producer of premium and specialty channels. It is also a major player in the collection and distribution
of pay-TV offerings, with 11.1 million subscriptions to its packages. With its international operations, the Group’s portfolio totals 12.7 million subscriptions. It is a
pioneer in the development of new television services and a major player in the production and distribution of feature films.
2.6.1.1. Programming Activities
Canal+ channels
Canal+ Group offers five premium channels with exclusive, original and innovative programming. Launched in 1984, Canal+ has a unique format of general channels,
including films, sports, news, drama, documentaries and entertainment programs. In addition to Canal+, Canal+ Group has created four high value-added channels
with their own programming and identity: Canal+Cinéma, Canal+Sport, Canal+Family and Canal+Décalé (together known as “Les Chaînes Canal+”).
In 2010, Les Chaînes Canal+ broadcast approximately 480 films, some 360 of which on the Canal+ channel alone. Canal+Décalé offers subscribers all genres of film, as
well as exclusive coverage of major film-industry events (such as the Cannes Film Festival, the Césars and the Oscars).
Canal+ Group has developed widely recognized expertise in sports coverage, distinguished by exclusive programs, accurate and relevant commentary with prestigious
experts and internationally recognized technical experts. Les Chaînes Canal+ channels cover approximately sixty sporting events, including the most important French
competitions: League 1 soccer, major foreign championships (including the English Premier League, the Spanish Liga and the Italian Serie A, the broadcast rights to
which were renewed in 2009), the Champions League, the Europa League, as well as the Top 14, southern hemisphere rugby (new agreement reached in 2009), tennis
(including Wimbledon and the US Open), golf (Vivendi Trophy), boxing, track and field. In total, the Canal+ Channels offer an average of over 5,500 hours of sports per
year, mostly live.
The TPS Star channel, which was acquired by Canal+ Group following its merger with the TPS group in 2006, is a general-interest premium television channel
broadcasting free-to-air and encrypted programs, marketed by the unit in the context of offerings by the Canal+ Group or other distributors. It primarily broadcasts
films (145 exclusive premier films in 2010) and sports (with three live European championship games each week), as well as new series and news items.
A co-production plan announced in January 2011 with Orange provides for the merger of TPS Star with Orange Ciné Max, the lead channel in the Orange Cinéma
Séries package, to create a new premium channel, Orange Ciné Star. It will be inspired by the editorial lines of Orange ciné max and TPS Star and will offer exclusive
premier programming, primarily films and series.
Specialty channels
Canal+ Group offers 21 channels of specific programming covering the most popular themes on television: films (seven CinéCinéma channels), sports (Sport+,
Infosport), news (i>Télé), documentaries (four Planète channels), lifestyle (Cuisine TV, Seasons), series (Jimmy, Comédie!) and youth (Piwi, Télétoon and Télétoon+1).
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2.6.1.2. Programming Activities
Canal+ Group is a leading aggregator of pay-TV channels in France. This activity consists of collecting and assembling channels produced and broadcast by the group
or by third parties in specialty packages or packs as cohesive and attractive premium and multi-channel television offerings. The group offers a package of premium
channels that includes the Canal+ channel and its offerings, combined within the “Canal+” offering, and a package of channels, CanalSat, covering approximately ten
different themes (including film, sports, youth, music, discovery and news items).
CanalSat consists of channels produced and broadcast by the group or by third parties, selected by paying specific attention to the quality of the programming and
performance in terms of audience and subscriber satisfaction, particularly for exclusively broadcast channels.
CanalSat, which is available by satellite and broadband Internet (ADSL), offers approximately 300 channels, 60 of them on an exclusive basis. This substantial number
of exclusive channels is one of the major strengths of the CanalSat offering, allowing it to clearly distinguish itself from all other multi-channel offerings.
Moreover, a customized offering that includes a mini-pack of five specialty channels, as well as the 19 free national channels, is also available on DVB.
2.6.1.3. Distribution Operations
Canal+ Group distributes its premium offerings (“Les Chaînes Canal+”) and multi-channels (CanalSat) through specific subscriptions on all broadcasting platforms:
DVB, satellite, broadband Internet (ADSL), cable (only on the “Les Chaînes Canal+”), mobile and Internet. These offerings, which cover a wide range of rates (from
12 to 70 euros per month), thus address every household. They are marketed directly by the group through call centers and websites, or through commercial partners
on physical distribution networks (big-box stores, specialized stores, phone operator boutiques, amounting to an aggregate of approximately 7,000 points of sale) or
the distribution platforms of Internet access providers.
Regardless of the marketing method, Canal+ Group maintains an exclusive relationship with subscribers to the Canal+ and CanalSat offerings, from the activation of
rights until cancellation, in accordance with a “self-distribution” model. This unique model guarantees it an extremely close relationship with its subscribers.
With 6.1 million subscribers in Metropolitan France as of December 31, 2010, the group holds the largest subscriber base for a pay-TV offering, representing a
penetration rate of 22% of all French households. Since elimination of the analog broadcast signal, which occurred, for the Canal+ channel, on November 24, 2010
(one year prior to the complete suspension of analog broadcasting in France, which is scheduled for year-end 2011), this subscriber base has become 100%
digital. This introduces new opportunities for enhancing the services offered (particularly via service or content options) allowing even further improvement in
subscriber retention and attracting new customers.
In the context of its distribution network, the group also markets certain of its specialty channels and TPS Star, through third-party distributors, specifically the cable
operator Numericable, and all Internet access providers, which include them in their own multi-channel pay-TV packages.
In the French Overseas territories (collectivités), Africa and internationally (Poland and Vietnam), the group has adapted its distribution strategy by taking into account
the specific nature of each of these markets.
2.6.1.4. New Services
As a digital pioneer in Europe and in new television practices, Canal+ Group is also a leader in on-demand and high-definition television and multi-screen distribution.
High-Definition (“HD”) Television
As the first group to have initiated a high-definition (HD) satellite offering in France, in the spring of 2006, the Canal+ Group currently broadcasts the “Canal+
Channels” in HD on all platforms that allow it: satellite, cable and broadband Internet (ADSL) (on DVB, only the Canal+ channel is currently broadcast in HD due to
technical limitations specific to this platform). CanalSat offers 19 specialty channels in HD on satellite and ADSL.
VoD and catch-up TV
Since 2005, Canal+ Group has offered a video-on-demand (VoD) service: CanalPlay. It is accessible without subscription and available directly on television via cable
(Numericable), satellite (with connected set-top boxes) and ADSL (Free and Bouygues), as well as on computer via the www.canalplay.fr website. CanalPlay is also
accessible from game consoles (PSP and Xbox 360) and on certain televisions and blu-ray readers from LG and Thomson. CanalPlay currently offers one of the largest
VoD catalogs in France, with some 8,500 titles available, including over 3,500 films.
Canal+ and CanalSat on-demand services are offered free to subscribers. They allow access to a catalog of programs that may be viewed for a certain time after their
initial release, on television, computer and mobile phone devices (smartphones and tablets). These catch-up TV services are an important factor in subscriber
retention. Thus, over five million programs are viewed each month by subscribers.
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Decoders
In November 2008, Canal+ Group launched +Le Cube, a high-end HD set top box with an innovative design, an Internet connection and a hard drive allowing access to
exclusive services (ability to view certain series before their first release). Since September 2010, the Group has distributed a more advanced version with an Internet
connection via Wi-Fi. It envisions the massive rollout of this equipment among its subscribers to offer packages (the “Canal+ Channels” and CanalSat) that are even
more personalized and of even higher quality. By the end of 2012, the entire satellite customer base should be equipped with IP-connectable set top box. All satellite
subscribers may thus receive “Les Chaînes Canal+” in HD, catch-up TV packages, and all additional interactive services. The connection will also allow the group to
refine its knowledge of subscribers and recommend targeted content.
Mobile and Web TV offers
In order to take into account new methods of television consumption, Canal+ Group offers customers of “Les Chaînes Canal+” or CanalSat the ability to supplement
their regular subscriptions with additional services for mobile devices (phones, tablets). Subscribers to the Group’s packages may thus access “Les Chaînes Canal+”
and CanalSat, as well as catch-up television services, Canal+ and CanalSat on demand, via an Internet connection (3G/3G+ or Wi-Fi), from a mobile phone or tablet.
Available on the Apple iPhone, iPod Touch and iPad, as well as on other operating systems such as Android, the free application has exceeded two million downloads
since December 2009.
In November 2010 the Group also launched a computer-based television service (Web TV) that allows access to “Les Chaînes Canal+” and CanalSat, as well as to the
Canal+ and CanalSat on-demand catch-up TV services, through a high-speed Internet connection on a desktop computer or laptop.
Access via game consoles
In June 2009, the Group entered into a strategic partnership with Microsoft to combine the content of Canal+ Group with Microsoft’s products and innovations.
Initially, this partnership specifically permitted access to CanalPlay services, Canal+ on demand, and the optional Foot+ channel, on the Microsoft Xbox 360 console. In
October 2010, the Group expanded its partnership with Microsoft to allow the broadcast of encrypted programs from the Canal+ channel on the Xbox 360 game
console via Xbox Live.
2.6.1.5. Overseas and International Pay-TV Operations
Canal+ Overseas
Canal+ Group participates in international operations through its Canal+ Overseas subsidiary, the largest Francophone pay-TV operator in the French overseas
territories and Africa.
Canal+Overseas offers pay-TV packages (including Canal+ and Canalsat), giving access to over 300 channels, mostly in French, overseas: the Caribbean (French West
Indies and Guiana), the Indian Ocean (Réunion, Mayotte and Mauritius), and the Pacific (New Caledonia and French Polynesia).
Canal+Overseas is also the largest pay-TV operator in Francophone Africa, with a presence in 30 countries of Central and West Africa, as well as in Madagascar.
Following a commercial agreement entered into in 2009 with the operator Multichoice, the pay-TV leader in Anglophone Africa, Canal+ Group expanded its presence
to several countries in Central Africa with large Francophone minorities, such as Burundi, Rwanda and the Democratic Republic of the Congo.
Canal+ Group is a pay-TV leader in Poland through Cyfra+, a 75% owned subsidiary. Cyfra+ produces and broadcasts the premium Canal+ package, including channels
such as Canal+, Canal+Film, Canal+Film HD, Canal+Sport, Canal+Sport 2 and Canal+Sport HD. It also produces and broadcasts seven specialty channels. Cyfra+ also
aggregates and distributes to its subscribers a package of over 100 television and radio channels, including 63 channels in Polish, as well as approximately one
hundred additional channels accessible with free-to-air satellite receivers. At year-end 2010, Cyfra+ had 1.5 million subscribers.
In January 2010, Canal+ Group launched K+, a new satellite channel package operated by its subsidiary VSTV in Vietnam. This launch follows the partnership entered
into between Canal+ Group and VTV, the Vietnamese TV station, in June 2009, and the creation of a joint venture, VSTV, which is responsible for the development and
marketing of this package.
2.6.2. Film Production and Distribution Operations
StudioCanal
StudioCanal, a subsidiary of Canal+ Group, is the European leader in the co-production, acquisition and distribution of feature films, and the only one to operate in the
three major European markets: France, United Kingdom and Germany. It controls a powerful distribution tool, which covers all genres (theater, video, television and
video on demand). In addition to the three territories in which it operates directly, StudioCanal is involved in top-level international sales, as well as distribution
agreements from its catalog in the rest of the world.
StudioCanal owns the third-largest film catalog in the world, with extended rights to over 5,000 French, British, Italian, German and American titles, and limited rights
in Germany to 6,000 other American and German films.
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StudioCanal is developing an active international production policy to promote common programming in its three territories. This policy relies on the strength of its
catalog, allowing it to develop remakes, and on the implementation of privileged partnerships with producers in France, the United Kingdom and the United States.
StudioCanal is also active in animation and 3D, due to its exclusive, long-term agreement with Wave, a Belgian production company that is a European leader in this
domain, and which produced Le voyage extraordinaire de Samy. Currently under production, Tinker Tailor Soldier Spy (La Taupe), by Tomas Alfredson, is an adaptation
of the hit novel by John le Carré. It will bring together Gary Oldman, Colin Firth and Tom Hardy, and is co-produced with Working Title.
Among theater releases scheduled in France in 2011 are films co-produced by StudioCanal: My piece of the pie by Cédric Klapisch with Karin Viard and Gilles
Lellouche; Hollywood, by Frédéric Berthe and Pascal Serieis, with Florence Foresti and Jamel Debbouze; Unknown by Jaume Collet-Serra with Liam Neeson
and Diane Kruger; and Special Forces by Stéphane Rybojad, with Diane Kruger, Benoit Magimel and Djimon Hounsou.
2.6.3. Other Businesses
Canal+ Régie
Canal+ Régie is the exclusive advertising arm of the Canal+ Group. A wholly-owned subsidiary of the group, it sells advertising on “Les Chaînes Canal+” (free
programming slots only), on i>Télé, and ten specialty channels broadcast by the group (Sport+, Infosport, Planète, Planète No limit, Jimmy, Comédie!, Cuisine TV,
Piwi, Télétoon and Télétoon+1).
Canal+ Régie occupies a unique position among TV entities in France. Its unique CSP+ positioning gives it an indisputable role in covering premium television targets.
Recognized also for its commercial and marketing innovations, Canal+ Régie has also allowed the group to post continuously growing advertising revenue for seven
years, despite a hostile economic environment, and contrary to the trend experienced by the large television channels.
Canal+ Régie also markets seven Canal+ Group websites, including www.canalplus.fr, which attracts five million unique visitors per month and 20 million video views.
Due to the creation of the “Advertising Exposure Guarantee” (AEG) in 2009, Canal+ Régie is the only advertising company in the world capable of guaranteeing the
visibility and duration of exposure of all the campaigns broadcast on its websites. Its expertise extends to Canal+ and i> Télé applications on mobile platforms (iPhone,
iPad, Android, Blackberry, Windows mobile, etc.).
Canal+ Events
At the beginning of 2008, Canal+ Group initiated the organization of sporting events through Canal+ Events, a wholly-owned subsidiary. The purpose is to strengthen
Canal+ Group’s presence in the value chain of sports events: from organization to broadcasting, including all marketing operations, both in France and abroad.
Sporting events organized by Canal+ Events include the French Open, the ATP tennis tournament at Montpellier, the Metz marathon, the Vivendi Trophy and the
Vivendi Cup, international tournaments including the European Golf Tour, as well as the Mauritius Golf Masters and the Winter X European Games at Tignes.
Canal+Events also provides commercial services for the ASVEL basketball club.
Canal+ Events has also become an internationally recognized player in the business of broadcasting sports competitions. It also markets the international rights to
League 1 and League 2 French soccer championships, the League Cup for the Top 14, OM TV, the French Basketball Team and the French Basketball Championship.
2.6.4. Seasonality
The pay-TV business of Canal+ Group relies on subscription contracts. Due to the duration of these contracts, the pay television business of Canal+ Group generates a
predictable, recurring monthly revenue stream. However, the Group’s operations have traditionally been affected by a seasonality factor, causing its most significant
sales to occur at the start of the academic year, following the summer holidays, and the year-end celebrations. As for activity in Africa, international or local sporting
events, such as the Africa Nations Cup, may also influence sales volumes and hence seasonality, particularly for subscriptions without commitment.
In Europe, the audiovisual communications industry is subject to national laws and regulations enforced by regulatory authorities such as the French Audiovisual
Council (“CSA”). In general, these authorities grant broadcast licenses for specific periods. In France, Canal+ has a license to broadcast the Canal+ channel via
terrestrial networks and networks that do not use frequencies assigned by the CSA, such as satellite, cable and broadband Internet. This authorization was renewed
in December 2000 for five years, then extended for five additional years by a CSA decision dated November 22, 2005. Then, pursuant to the Law of March 5, 2007 on
the television of the future (see infra), the Canal+ channel’s network broadcasting authorization was extended for an additional ten years, i.e., until December 6, 2020.
The European Union regularly adopts directives governing the operations of Canal+ Group and its effect on competition. The European Union also adopted a series of
directives that have a direct impact on the communications industry, such as the “Television Without Borders” directive, which became the “audiovisual media
services directive,” as well as directives on intellectual property, e-commerce, data protection and telecommunications.
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Canal+ Group, through its subsidiary Canal+ France, holds a controlling interest in Canal+ SA, the company authorized to broadcast the Canal+ premium channel,
which is listed on compartment B of Euronext Paris. Furthermore, a non-EU national shareholder is not permitted to hold more than 20% of a company which holds a
broadcast license.
Canal+ Group currently holds six DVB authorizations: five for the pay channels (Canal+ HD – since July 22, 2008, Canal+ has been authorized to convert standard
broadcasts to HD broadcasts - Canal+ Cinéma, Canal+ Sport, Planète and TPS Star) and one for a free channel (i>Télé). The number of authorizations a single company
may hold, directly or indirectly, for a digital broadcast national television service is seven.
In addition, on May 27, 2008, following a call for tenders, the CSA selected both Canal+ and i>Télé channels to provide personal mobile television (“MPT”) broadcasting.
The law of March 5, 2007 on the television of the future also awards Canal+ with an additional authorization for DVB following the elimination of analog broadcasting,
i.e., at year-end 2011.
Under its broadcasting license in France, Canal+ SA must comply with the following requirements: 60% of the audiovisual works and films broadcast by the channel
must be European works and 40% of them must be original French-language films. In the audiovisual segment, pursuant to a decree dated October 21, 2009, which
reiterates agreements entered into in the fall of 2008 with representative organizations for producers and authors, each year, Canal+ must allocate at least 3.6% of its
aggregate net revenues from the previous year to investment in national works (i.e., works of fiction, animated films, documentaries, music videos and the recording or
recreation of live events). A portion of this expenditure (representing at least 3.1% of the net revenues) is dedicated to the development of independent production.
With regard to films, a new agreement entered into on December 18, 2009, with professional film organizations including BLOC (which includes the ACP, SPI, DIRE, SDI
and GNCR), the UPF and the ARP, maintains and increases the film financing obligations, under which Canal+ is required to dedicate 12.5% of its annual revenues to the
acquisition of European films (compared to 12% previously), 9.5% of which must be original French-language films (compared to 9% previously). This figure includes a
success bonus, which was initially variable and is now guaranteed at 0.5%. It will benefit French films that sell more than 500,000 tickets or the advance purchases of
French and European films characterized by diversity which prove to be greatest successes. This agreement, required by regulation, became effective in 2010.
Since 2006, Canal+ has offered full-length films to its subscribers every week-night. The channel also seeks to finance a wide variety of films and participates in
financing all market sectors equally. To this end, Canal+ dedicates 17% of the value of the obligation to acquire original French films with a budget of equal to or
less than €4 million.
In addition, Canal+ may dedicate up to one-third of its digital broadcast offerings to shows other than those on the premium channel, allowing it to enhance its
audiovisual offerings.
The legal status of the catch-up television service (Canal+ on demand) was clarified in 2009. The law of March 5, 2009 governing audiovisual communication provides
for the pooling of the financing obligations applicable to the audiovisual production of a catch-up television service with those of the related television service. In
relation to films, the film agreement entered into on December 18, 2009 provides that the price allocated to distribution rights on catch-up television must be taken
into consideration in determining Canal+’s obligations to contribute to film production.
Moreover, under French Law 86-1067 of September 30, 1986 on Freedom of Communications, Canal+ Group is subject to the must-carry system, under which
distributors of services on networks that do not use terrestrial frequencies allocated by the CSA (in particular, cable, satellite and ADSL) must comply with the
following requirements:
• to make channels owned by the France Télévision group (France 2, France 3 and France 5), Arte and TV5 as well as services specifically intended for
viewers within Metropolitan France produced and broadcast by RFO available, free of charge to their subscribers, unless these producers / broadcasters
believe that the service offering is incompatible with their public service goals. Transmission and broadcast costs are paid by the service distributors;
• to make the RFO services that are broadcast via the terrestrial network within the community available free of charge to their subscribers in French
overseas collectivities, unless RFO believes that the service offering is incompatible with its public service goals. Transmission and broadcast costs are
paid for by the service distributors;
• to broadcast the programs and interactive services of La Chaîne Parlementaire (the French parliamentary channel) free-to-air and at their own expense,
using broadcast technologies equivalent to those employed by French national television companies, unless such broadcast is denied by La Chaîne
Parlementaire producers;
• to provide services for the deaf and hearing-impaired as part of the television services freely available to the general public (the required technical
measures being at their own expense); and
• any service distributor using a non-satellite network, together with frequencies not allocated by the CSA, must make available to its subscribers local
public initiative services, which provide local information, subject to certain restrictions and conditions as set forth in Decree 2005-1355 on notification
requirements for the distributors of audiovisual communication services, dated October 31, 2005.
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In addition, film release schedules were adjusted pursuant to a law dated June 12, 2009. Canal+ Group adheres to a new agreement entered into on July 6, 2009,
which was extended by an order dated July 9, 2009, and which provides for the following release schedule:
• for films available in video on pay-per-view (the Canal Play service) and on DVD: a minimum of four months following theater release and three months
for films that sold less than 200 tickets in their fourth week in theaters;
• broadcasting time periods for film channels:
- first window: 10 months for an original broadcast if an agreement is entered into with film organizations; 12 months otherwise; and
- second window: 22 months if an agreement is entered into with film organizations; 24 months otherwise;
• broadcasting time periods for unscrambled television channels and other pay TV channels:
- 22 months if the channel contributes at least 3.2% of its revenue to film production; and
- 30 months in other cases.
In the context of the merger between TPS and Canal+ Groups’ pay-TV activities in France, 59 major agreements were entered into by Vivendi and Canal+ Group.
These agreements guarantee that the deal will not have an anti-competitive effect on any of the relevant markets in question. These commitments are described in
section “2.6.7. Competition”.
2.6.6. Piracy
Canal+ Group actively combats audiovisual piracy by promoting technological innovation and monitoring, as well as by pursuing violators in order to protect its
commercial interests and those of its beneficiaries.
The Group acts effectively through dedicated teams and consultants specializing both in the analysis and design of security components and in systems analysis,
set-top boxes and software for the sharing of subscriptions or content by Internet, in close and ongoing contact with manufacturers of set-top boxes and systems to
provide conditional access. In terms of legal action, Canal+ Group takes all preventive and representative measures against those who carry out piracy, in light of the
spread and sophistication of piracy techniques.
It also actively collaborates with the film industry to contain Internet distribution of copies of promotional DVDs prior to the release of the film in theaters.
2.6.7. Competition
Following an opinion of the French Anti-Trust Council and pursuant to a decision dated August 30, 2006, Vivendi and Canal+ Group gave 59 commitments to the
French Minister of the Economy relating to the combination of the pay-TV operations of Canal+ Group and TPS. These commitments are subject at all times to strict
compliance and remain under the strict control of the relevant authorities to ensure proper execution. They were made for a maximum of six years (some for five
years), and are intended to correct any anti-competitive effect identified by anti-trust authorities which may result from the combined operations in one of their
relevant markets.
Canal+ Group has made additional commitments relating to the pay-TV market following the merger of SFR and Neuf Cegetel, which was approved by the French Minister
of the Economy by a decision dated April 15, 2008. Canal+ Group has undertaken to provide access to two of the channels it produces to any xDsl or FTTX distributor upon
request for a period of five years: i.e., the series and fiction channel Jimmy, and the family film channel Ciné Cinéma Famiz. In addition, opening of access to the secondary
market for the production and broadcast of specialty channels was strengthened by the termination of Canal+ Group’s exclusive xDsl distribution rights on channels
produced and broadcast by the M6 group. Finally, Canal+ Group had to reiterate the commitments it took in connection with the merger between SFR and Tele2, which
was approved by the European Commission on July 18, 2007, aimed specifically at not offering more favorable conditions to the Vivendi Group and its subsidiaries
(including SFR and Neuf Cegetel) in relation to the distribution of themed channel packages, Canal+ audiovisual services and pay-per-view services.
The French pay-TV market is undergoing significant change, distinguished specifically by the increasing number of distribution platforms and technologies, and in
particular the development of new offers from Internet Service Providers (“ISPs”). One of them, Orange, recently positioned itself in the upstream market for the
acquisition of audiovisual rights as well as on the secondary market for the production, broadcast and distribution of channels. It has become a major competitor in the
acquisition of premium quality sports and film content, in particular by acquiring certain broadcasting rights for the League 1 soccer championship for the 2008-2011
seasons and certain other rights from US studios or French producers under multi-year agreements. The rights thus acquired are exploited by this operator on channels
reserved solely for phone and high-speed Internet subscribers. They are offered by satellite in areas where broadband Internet (ADSL) speed is not sufficiently fast to
allow television reception. However, we have noted a shift in Orange’s strategy in relation to content; in particular, its mid-2010 announcement indicates that it will
henceforth encourage “open partnerships” in this regard.
Competition is also increasingly focused on new, non-linear services, which offer quality and premium content on VoD. These services represent a real growth vector
for ISPs, allowing a rapid pay-TV offering for television viewers without production and regulatory restrictions imposed on producers of a television service.
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The growing consumer attraction to off-line television services (including VoD and catch-up television, etc.) also favors the entry of Internet service programmers into
this market. By “getting a foot in the door” of the audiovisual creation economy, these web players will be able to compete with traditional television-industry players
in their role as both programmer and distributor, without being subject to the same restrictions. Indeed, they escape the stringent regulations that apply to audiovisual
players in France. It might also be feared that this alteration to the competitive landscape will be heightened by the progress of online television.
In addition to the pressure generated by ISPs, competitive pressure from the cable operator Numéricable remains very strong due to the development of fiber optic
networks. The transition to very-high-speed enables this operator to diversify and enhance its subscriber-based service offering. This operator also uses its financial
resources to acquire broadcasting rights and produce sports themed channels.
Finally, the indisputable and rising success of DVB in France is radically changing the audiovisual landscape by substantially opening up the market to new competitors
in the form of free TV producers.
The principal raw materials used in Canal+ Group’s businesses are polycarbonates for the production of DVDs and paper for the packaging of products. These raw
materials do not experience price fluctuations that could have a material impact on Canal+ Group’s business. Canal+ Group’s business operations are not dependent on
any raw material suppliers.
The group’s research and development (R&D) policy primarily focuses on innovations in new services, new uses and new technologies.
The group has a cross-disciplinary team within the Channel Experience Department, which manages its R&D policy. Its responsibilities are as follows:
• promoting a process to monitor emerging trends relating to usage, services and technologies, as well as their conceptualization in terms of ideas for
products and services;
• modeling and prototyping these services; testing these services, both internally and subsequently through subscriber panels, to determine their relevance; and
• planning roll-outs for these new services throughout the group’s products.
The conversion of an idea or concept from the monitoring phase to the prototyping phase, then to deployment, is determined by a cross-disciplinary committee
combining the operational directors (Distribution, Programming, Technologies and Information Systems).
Some of the projects carried out within this framework benefit from research tax credits.
2.7. Other Operations
2.7.1. NBC Universal
NBC Universal (NBCU), a major media player, was formed in May 2004 pursuant to the merger of Vivendi Universal Entertainment and NBC businesses. Vivendi held
20% of NBCU. Following the announcement of the GE-Comcast agreement involving NBC Universal (NBCU), Vivendi and GE simultaneously entered into an agreement
in December 2009 governing Vivendi’s complete exit from the share capital of NBCU, thus amending the agreement of May 2004 described above. In September 2010,
Vivendi sold 7.66% of NBC Universal to GE for an aggregate of $2 billion. Subsequently, on January 25, 2011, Vivendi sold its remaining 12.43% interest in NBC
Universal to GE, for an aggregate amount of $3.8 billion, thus selling its entire 20% interest in NBCU for an aggregate cash amount of $5.8 billion, excluding dividends
($390 million between January 2010 and January 2011), according to the agreement of December 2009 between Vivendi and GE.
2.7.2. Vivendi Mobile Entertainment
Vivendi Mobile Entertainment (“VME”), formed in early 2007, is a wholly-owned subsidiary of Vivendi. VME’s role is to create a new, subscription-based digital
distribution channel for music, films, TV series and games.
It has operated in France since 2008 and in Germany since mid-2010, under the zaOza brand, a mass-market digital service specifically designed to target the 20-40
age group. This subscription-based service offers downloading or streaming, at the customer’s choice, from a large selection of hundreds of films, TV series, music,
games and applications, which is updated daily.
After negotiating the “share rights” to the content it offers, zaOza has become the leading community exchange and content sharing site; subscribers may, in effect,
freely exchange its content. ZaOza teams persuaded both designers and their legal beneficiaries in all sectors to achieve this outcome.
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Today, the world’s major groups that are active in content and Internet are heavily investing in the development of new cloud-computing platforms (using centralized
remote servers), which represents the key to the multi-screen digital distribution of tomorrow. VME, which has been developing its 100% proprietary-technology
cloud-computing platform since 2007, seeks to take advantage of these opportunities to accelerate its progression.
As of year-end 2010, zaOza has thus been able to enrich its catalog with films and TV series for PCs, smartphones, including the iPhone, tablet PCs and iPad, as well as
for connected TVs, whether directly or via game consoles and new DVD readers.
zaOza offers a simplicity and flexibility of usage that liberate the user from any technological constraints: for example, a subscriber may choose films from an iPhone
and watch them either on his online TV, iPhone or PC.
This innovative pay model has already resulted in the membership of hundreds of thousands of subscribers: thirty months after its commercial launch, over 1.2 million
individuals have become paying subscribers in France and Germany, with an average subscription life of approximately one year. Subscriptions to zaOza are not
subject to any time commitment.
Henceforth, VME is in a position to accelerate its international progression within the Vivendi group and to play a leading role in developing the pay digital distribution market.
2.7.3. Digitick
At year-end 2010, Vivendi took over Digitick, which now has a share capital that is distributed between Vivendi (65.2%), SFR (27.1%) and Digitick executive
management (7.7%).
Digitick is the French leader in electronic ticketing (e-ticket). It offers:
• to organizers of shows, cultural and sporting events, etc.: an innovative and complete way to manage their ticketing system in real time, allowing them
to optimize their receipts; and
• to the public: a virtual ticket-sales service for shows, sporting, culture and leisure events.
These tickets are available on the www.digitick.com website, and on organizer or affiliate websites, via mobile Internet and through partners, at over 4,000 physical
points of sale. Upon completing a transaction, customers may print or download their tickets onto a mobile phone device. In either case, they obtain a barcode that
ensures the validity of their ticket.
Organizers benefit from a complete solution allowing them to ensure control of access, simultaneously market their tickets on several channels, monitor changes
in tickets sold in real time, and offer additional services (hosting, SMS positioning, hotline).
2.7.4. Wengo
Wengo is the French leader in phone-based expert assistance.
Through its website, www.wengo.fr, the company has built a customer-relations platform using independent experts to obtain responses to questions on various
topics such as education, legal advice, business creation, computers, psychology, coaching, astrology, health and wellbeing.
This service is aimed at individuals as well as professionals. It allows customers to contact 1,500 available experts 7 days a week, 24 hours a day.
Wengo serves as an intermediary, offering guarantees in terms of security (payment by credit card), quality (certification of experts and evaluation
by their users), and confidentiality.
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Section 3 Litigation
In the normal course of its business, Vivendi is subject to various lawsuits, arbitrations and governmental, administrative or other proceedings (collectively referred to
herein as “Legal Proceedings”).
To the company’s knowledge, there are no Legal Proceedings or any facts of an exceptional nature, including, to the company’s knowledge, any pending or threatened
proceedings in which it is a defendant, which may have or have had in the previous twelve months a significant impact on the company’s and on its group’s financial
position, profit, business and property, other than those described herein.
Trial of Vivendi’s former officers in Paris
In October 2002, the financial department of the Parquet de Paris launched an investigation into the publication of false or misleading information regarding the
financial situation and forecasts of the company and the publication of untrue or inaccurate financial statements for the fiscal years 2000 and 2001. Additional charges
were brought in this investigation relating to purchases of its own shares by the company between September 1, 2001 and December 31, 2001, following the filing by
the AMF of an investigation report with the Parquet de Paris on June 6, 2005. Vivendi joined the proceedings as a civil party.
On January 23, 2009, the Public Prosecutor transmitted to the judge and civil parties a final prosecutor’s decision of dismissal in respect of all matters under
investigation during the period 2000-2002. On October 16, 2009, the Judge Mr. Jean-Marie d’Huy ordered all parties to face trial before the Criminal Court.
The charges of disclosure and publication of untrue or inaccurate financial statements were rejected by the Judge. The trial took place from June 2 to June 25, 2010,
before the 11th Chamber of the Paris Tribunal of First Instance (Tribunal de Grande Instance de Paris). The Prosecutor asked the Court to drop charges against
the defendants.
The Court rendered its judgment on January 21, 2011. The previous recognition of Vivendi as a civil party was confirmed. Jean Marie Messier, Guillaume Hannezo,
Edgar Bronfman Jr. and Eric Licoys received suspended sentences and fines. Jean-Marie Messier and Guillaume Hannezo were also ordered to pay damages to
shareholders entitled to reparation as civil parties. The former Vivendi officers as well as some civil parties appealed the decision.
Securities Class Action in the United States
Since July 18, 2002, sixteen claims have been filed against Vivendi, Messrs. Jean-Marie Messier and Guillaume Hannezo in the United States District
Court for the Southern District of New York and in the United States District Court for the Central District of California. On September 30, 2002, the
New York court decided to consolidate these claims in a single action under its jurisdiction entitled In re Vivendi Universal S.A. Securities Litigation.
The plaintiffs allege that, between October 30, 2000 and August 14, 2002, the defendants violated certain provisions of the US Securities Act of 1933
and US Securities Exchange Act of 1934, particularly with regard to financial communications. On January 7, 2003, the plaintiffs filed a consolidated
class action suit that may benefit potential groups of shareholders.
On March 22, 2007, the Court decided, concerning the procedure for certification of the potential claimants as a class (“class certification”), that persons
from the United States, France, England and the Netherlands who purchased or acquired shares or ADS of Vivendi (formerly Vivendi Universal SA)
between October 30, 2000 and August 14, 2002, could be included in the class.
On April 9, 2007, Vivendi filed an appeal against this decision. On May 8, 2007, the United States Court of Appeals for the Second Circuit denied Vivendi’s
petition seeking review of the District Court’s decision with respect to class certification. On August 6, 2007, Vivendi filed a petition with the Supreme
Court of the United States for a Writ of Certiori seeking to appeal the Second Circuits decision on class certification. On October 9, 2007, the Supreme
Court denied the petition.
On March 12, 2008, Vivendi filed a motion for reconsideration of the Court’s class certification decision dated March 22, 2007, that included French
shareholders in the plaintiff class. On March 31, 2009, the Court denied that motion.
Following the March 22, 2007 certification decision, a number of individual cases were filed against Vivendi on the same grounds as the class action.
On December 14, 2007, the judge issued an order consolidating the individual actions with the securities class action for purposes of discovery. On March
2, 2009, the Court deconsolidated the Liberty Media action from the class action. On August 12, 2009, the Court issued an order deconsolidating the
individual actions from the class action. The Liberty Media and individual plaintiffs’ actions remain pending against the company.
The trial of the class action lawsuit commenced on October 5, 2009, in New York.
On January 29, 2010, the jury returned its verdict. It found that 57 statements made by Vivendi between October 30, 2000, and August 14, 2002, were
materially false or misleading and were made in violation of Section 10(b) of the Securities Exchange Act of 1934. Plaintiffs had alleged that those
statements were false and misleading because they failed to disclose the existence of an alleged “liquidity risk” which reached its peak in December
2001. However, the jury concluded that neither Mr. Jean-Marie Messier nor Mr. Guillaume Hannezo were liable for the alleged misstatements.
As part of its verdict, the jury found that the price of Vivendi’s shares was artificially inflated on each day of the class period in an amount between
€0.15 and €11.00 per ordinary share and $0.13 and $10.00 per American Depository Receipt (“ADR”), depending on the date of purchase of each ordinary
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Vivendi Litigation
share or ADR. Those figures represent approximately half the amounts sought by the plaintiffs in the class action. The jury also concluded that the
inflation of the Vivendi share price fell to zero in the three weeks following the September 11, 2001, tragedy, as well as on stock exchange holidays
on the Paris or New York markets (12 days) during the class period.
On March 26, 2010, Vivendi filed certain post-trial motions with the Court, challenging the jury’s verdict.
On June 24, 2010, the US Supreme Court, in a very clear statement, ruled, in the Morrison v. National Australia Bank case, that American securities
law only applies to “the purchase or sale of a security listed on an American stock exchange”, and to “the purchase or sale of any other security in
the United States”.
At a hearing that took place in New York on July 26, 2010, Vivendi petitioned the Court to apply the “Morrison” decision and therefore to exclude from
the class shareholders who did not purchase or sell their shares on a US exchange.
In a decision dated February 17, 2011 and issued on February 22, 2011, the Court, in applying the “Morrison” decision, confirmed Vivendi’s position
by dismissing the claims of all purchasers of Vivendi’s ordinary shares on the Paris stock exchange and limited the case to claims of French, American,
British and Dutch purchasers of Vivendi’s ADSs on the New York Stock Exchange. The Court declined to enter a final judgment, as had been requested
by the plaintiffs, saying that to do so would be premature and that the process of examining individual shareholder claims must first take place. The Court
denied Vivendi’s post-trial motions challenging the jury’s verdict. On March 8, 2011, plaintiffs filed a petition before the Second Circuit Court of Appeals
seeking to appeal the decision rendered on February 17, 2011, dismissing the purchasers who acquired their shares on the Paris stock exchange.
Vivendi still believes that it has solid grounds for an appeal, at the appropriate times. Vivendi intends to challenge, among other issues, plaintiffs’
theories of causation and damages accepted by the judge and, more generally, certain decisions made by the judge during the conduct of the trial.
Several aspects of the verdict will also be challenged.
On the basis of the verdict rendered on January 29, 2010, and an assessment of the matters set forth above supported by studies conducted by
companies specializing in the calculation of class action damages and in accordance with the accounting principles described in Notes 1.3.1 (Use of
Estimates) and 1.3.8 (Provisions), Vivendi made a provision on December 31, 2009, in an amount of €550 million in respect of the damages that Vivendi
might have to pay to class plaintiffs. Vivendi re-examined the amount of the reserve related to the Securities class action litigation in the United States,
given the District Court for the Southern District of New York decision on February 17, 2011 in our case, which followed the US Supreme Court’s decision
on June 24, 2010 in the Morrison case. Using the same methodology and the same valuation experts as in 2009, Vivendi re-examined the amount of the
reserve and set it at €100 million as of December 31, 2010, in respect of the damages, if any, that Vivendi might have to pay solely to shareholders who
have purchased ADSs in the United States. Consequently, as of December 31, 2010, Vivendi recognized a €450 million reversal of reserve, compared to
an accrual of €550 million as of December 31, 2009.
Vivendi considers that its provision and the assumptions on which it is based may have to be amended as the proceedings progress, and consequently,
the present amount of damages that Vivendi might have to pay the plaintiffs could differ significantly, in either direction, from the provision. As is
permitted by current accounting standards, no details are given of the assumptions on which this estimate is based, because their disclosure at this
stage of the proceedings could be prejudicial to Vivendi.
Elektrim Telekomunikacja
From 1999 until 2001, Vivendi invested in the capital of Polska Telefonia Cyfrowa Sp. Z.o.o. (PTC), the Polish mobile telephone operator. Vivendi made this
investment through Elektrim Telekomunikajca Sp. z o.o. (Telco) and Carcom Warszawa (Carcom), two companies that were formed together with Elektrim SA.
These shareholdings were the subject of several litigation proceedings, among which were several arbitration proceedings initiated by Deutsche Telekom
in Vienna, aiming, among others, at invalidating the transfer of the PTC shares from Elektrim to Telco, arbitration proceedings before the London Court
of International Arbitration (LCIA), launched by Vivendi against Elektrim regarding the Telco shareholders’ agreement entered into by both companies,
arbitration proceedings launched by Vivendi against the Republic of Poland, based on the treaty entered into between France and Poland relating to the
reciprocal encouragement and protection of investments, as well as numerous other proceedings before Polish courts.
On December 14, 2010, Vivendi entered into certain agreements with Deutsche Telekom, Mr. Zygmunt Solorz-Zak (the main shareholder of Elektrim) and
the creditors of Elektrim, including the Polish State and Elektrim’s bondholders, aimed at putting an end to the litigation regarding PTC’s share capital
ownership. These agreements were implemented on January 14, 2011, the date on which all proceedings among the parties were annulled. Vivendi
relinquished all its rights to the PTC shares and received €1.254 billion.
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Compañía de Aguas de Aconquija and Vivendi against the Republic of Argentina
On August 20, 2007, the International Center for Settlement of Investment Disputes (“ICSID”) issued an arbitration award in favor of Vivendi and
Compañia de Aguas de Aconquija, its Argentinian subsidiary, relating to a dispute that arose in 1996 regarding the water concession it held between
1995 and 1997, in the Argentinian Province of Tucuman. The arbitration award held that the actions of the provincial authorities had infringed the rights
of Vivendi and its subsidiary, and were in breach of the provisions of the Franco-Argentine Bilateral Investment Protection Treaty. The arbitration tribunal
awarded Vivendi and its subsidiary damages of US$105 million plus interest and costs.
On December 13, 2007, the Argentinian Government filed an application to vacate the arbitration award on the basis, among others, of an alleged conflict
of interest regarding one of the arbitrators. The ICSID appointed an ad hoc committee to rule on this application.
On August 10, 2010, the ICSID rejected the Argentinian Government’s application and the award of August 20, 2007 became final. As of the date of this
Report, the Argentinian Government has failed to comply with the award.
Claim by Centenary Holdings III Ltd.
Centenary Holdings III Ltd. (CH III), a former Seagram subsidiary, divested in January 2004, was placed into liquidation in July 2005. On January 9, 2009,
the liquidator of CHIII sued a number of its former directors, former auditors and Vivendi. The liquidator, acting on behalf of CH III’s creditors, alleges that
the defendants breached their fiduciary duties.
On September 30, 2010, Vivendi and one of the former directors of CHIII settled with the liquidator. This settlement put an end to the legal proceedings
brought against them and assigned to Vivendi all claims filed on behalf of the creditors.
Vivendi Deutschland against FIG
Further to a claim filed by CGIS BIM (a subsidiary of Vivendi) against FIG to obtain the release of a portion of the amount remaining due pursuant to
a buildings sale contract, FIG obtained, on May 29, 2008, the cancellation of the sale by a judgment of the Berlin Court of Appeal, which invalidated
a judgment rendered by the Berlin High Court. CGIS BIM was ordered to repurchase the buildings and to pay damages in an amount to be determined.
Vivendi delivered a guarantee so as to pursue settlement negotiations. As no settlement was reached, on September 3, 2008, CGIS BIM challenged
the validity of the judgment execution.
On April 23, 2009, the Regional Berlin Court issued a decision setting aside the judgment of the Berlin Court of Appeal dated May 29, 2008. On June 12,
2009, FIG appealed that decision. A second claim for additional damages was filed by FIG in the Berlin Regional Court and was served on CGIS on March
3, 2009. On December 16, 2010, the Berlin Court of Appeal rejected FIG’s appeal and confirmed the decision of the Regional Berlin Court, which decided
in CGIS’s favor and confirmed the invalidity of the judgment execution and therefore invalidated the order for CGIS BIM to repurchase the building and
pay damages.
LBBW et al against Vivendi
On March 4, 2011, 26 investors from Germany, Canada, Luxemburg, Ireland, Italy, Sweden, Belgium and Austria filed a complaint against Vivendi, before
the Paris Commercial Court. They are seeking damages for alleged losses they claim were incurred as a result of four financial communications made by
Vivendi in October and December 2000, September 2001 and April 2002.
Neuf Cegetel’s claim against France Télécom regarding the broadcasting of the Orange Foot channel
On May 14, 2009, the Paris Court of Appeal reversed a judgment that had upheld the claims made by Free and Neuf Cegetel against France Télécom
relating to the broadcasting of the Orange Foot channel, and held that the Orange Foot channel offer, which made subscription to the Orange Foot channel
conditional upon prior subscription to the Internet Orange ADSL offer, constituted a related sale transaction prohibited by the French Code of
Consumption. The Court of Appeal considered that the prohibition against related sale transactions was contrary to the regime established by the
European Directive 2005/29/EC of May 11, 2005 concerning unfair business-to-consumer commercial practices. SFR appealed the decision to the French
Supreme Court. On July 13, 2010, the French Supreme Court rejected SFR’s appeal.
French Competition Council – mobile telephone market
On April 10, 2009, SFR appealed before the French Supreme Court the decision of the Paris Court of Appeal dated March 11, 2009, which had confirmed
the financial penalties imposed on the three operators for having entered into an illegal agreement and exchanged information between 1997 and 2003.
On April 7, 2010, the French Supreme Court confirmed the decision of the Paris Court of Appeal dated March 11, 2009, with respect to SFR.
Vivendi’s complaint against France Télécom before the European Commission for abuse of a dominant position
On March 2, 2009, Vivendi and Free jointly filed a complaint against France Télécom before the European Commission (the “Commission”), for abuse of
a dominant position. Vivendi and Free allege that France Télécom imposes excessive tariffs on offers for access to its fixed network and on telephone
subscriptions. In July 2009, Bouygues Telecom joined in this complaint. In a letter dated February 2, 2010, the Commission informed the parties of its
intention to dismiss the complaint. On September 17, 2010, Vivendi filed a complaint before the Court of First Instance of the European Union in Luxemburg.
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Vivendi Litigation
Complaint against France Télécom before the French Competition Authority
On February 11, 2009, Neuf Cegetel and Groupe Canal+ jointly filed a complaint against France Télécom before the French Competition Authority for
abuse of dominant position and collusion with the French Professional Football League. Their complaint is that France Télécom uses a strategy intended
to restrict the marketing of its cinematographic and sporting rights to its exclusive ADSL subscribers only. The instructing magistrate issued a preliminary
report on August 5, 2010, in which he stated competition concerns and acknowledged France Télécom’s decision to propose certain commitments in
response to those concerns. On September 20, 2010, France Télécom sought an extension in order to prepare its response.
Complaint against France Télécom and Orange before the French Competition Authority
On August 9, 2010, SFR filed a complaint before the French Competition Authority against France Télécom and Orange for anti-competitive practices
on the professional mobile market.
Tenor againt Groupe SFR Cegetel, Groupe France Télécom and Bouygues Telecom
Tenor (a fixed operators association, which became ETNA) brought a claim before the French Competition Council alleging anti-competitive practices by
France Télécom, Cegetel, SFR and Bouygues Telecom in the telecommunications sector. On October 14, 2004, the French Competition Council fined SFR,
among others, for abuse of dominant position. On November 20, 2004, SFR filed an appeal. On April 12, 2004, the Court of Appeal overturned the decision
of the Competition Council, having decided that the allegations were not proven. On April 29, 2005, ETNA appealed against that ruling before the
French Supreme Court. On May 10, 2006, the Supreme Court overruled the decision of the Court of Appeal stating that the Court of Appeal should
have examined whether the alleged practices had an adverse impact on competition. On April 2, 2008, the second Court of Appeal denied the requests
made by SFR. On April 30, 2008, SFR appealed to the Supreme Court. On March 3, 2009, the Supreme Court reversed the decision dated April 2, 2008,
considering that “price scissoring” practices may not, as such, constitute anti-competitive practices.
On January 27, 2011, The Court of Appeal overruled the decision of the Competition Council stating that the grievances against SFR and France Télécom
have not been proven. The Court ordered the amount of the fine imposed by the Competition Council to be reimbursed.
Complaint lodged with the Competition Authority by Orange Réunion, Orange Mayotte and Outremer Telecom against
Société Réunionnaise du Radiotéléphone (SRR)
Orange Réunion and Orange Mayotte filed a complaint against SRR (an SFR subsidiary) for alleged discriminatory practices. On September 15, 2009, the
French Competition Authority imposed protective measures on SRR, requiring it to propose to its subscribers offers which do not discriminate based on
the network used, except to reflect the cost differences among the network operators. The French Competition Authority’s investigation is ongoing.
Complaint lodged with the Competition Authority by Outremer Telecom against Société Réunionnaise du Radiotéléphone
(SRR), France Télécom and Mauritius Telecom
On September 23, 2010, Outremer Telecom filed a complaint before the French Competition Authority and sought protective measures. It alleges that
SRR, France Télécom and Mauritius Telecom have entered into an illegal framework agreement relating to the submarine cable project, LION, in the
Indian Ocean.
Complaint of Bouygues Telecom against SFR and Orange in connection with the call termination and mobile markets
Bouygues Telecom brought a claim before the French Competition Council against SFR and Orange for certain alleged unfair trading practices in the call
termination and mobile markets (“price scissoring”). On May 15, 2009, the French Competition Authority resolved to postpone its decision on the issue
and remanded the case for further investigation. On December 13, 2010, SFR was heard on these allegations by the instructing magistrate.
Metro Goldwyn Mayer against Groupe Canal+ and others
In 1996, the TPS Group (TPS) entered into an output agreement with Metro Goldwyn Mayer Inc. (MGM), relating to the broadcasting rights of MGM’s
catalog. This agreement had an initial term of five years and was thereafter renewed for an additional five-year period before being terminated on
December 31, 2006. The agreement provided MGM with the right to renew the contract for a new five-year period if TPS merged with another satellite
operator before the termination of the agreement. Following the announcement of the merger between TPS and Canal+ France, MGM notified TPS that it
would exercise its renewal option and extend the agreement through December 31, 2011. TPS challenged this renewal based on the fact that the merger
effectively occurred in January 2007, after the termination of the agreement. In April 2007, MGM filed a complaint against Canal+ France, Canal+
Distribution SAS, as successor to TPS, and Groupe Canal+, with the District Court of New York seeking, among other things, damages for breach of
contract. Discovery as well as witness depositions are ongoing and are not expected to be completed before the end of June 2011.
Parabole Réunion affairs
In July 2007, the group Parabole Réunion filed a legal action before the Paris Tribunal of First Instance following the termination of the distribution on an exclusive
basis of the TPS channels in Reunion Island, Mayotte, Madagascar and Mauritius. Pursuant to a decision dated September 18, 2007, the Canal+ Group was
prohibited, under fine, from allowing the broadcast of these channels by third parties, unless it offered to Parabole Réunion the replacement of these channels by
other similarly attractive channels, to be distributed on an exclusive basis. Groupe Canal+ appealed this decision. In a ruling dated June 19, 2008, the Paris Court
of Appeal reversed the judgment and dismissed Parabole Réunion’s main claims against Groupe Canal+. On September 19, 2008, Parabole Réunion appealed to
the French Supreme Court. On November 10, 2009, the French Supreme Court dismissed the appeal brought by Parabole Réunion.
60
In parallel with the foregoing proceedings, on October 21, 2008, Parabole Réunion and its shareholders filed a claim against Canal Réunion, Canal Overseas,
CanalSatellite Réunion, Canal+ France, Groupe Canal+ and Canal+ Distribution, seeking the enforcement of the agreement entered into on May 30, 2008,
pursuant to which the companies would combine their TV channel broadcasting activities in the Indian Ocean. The execution of this agreement was contingent
upon the satisfaction of certain conditions. As these conditions were not satisfied, the agreement became null and void. On June 15, 2009, the Commercial Court
rejected Parabole Reunion’s claim. Parabole Réunion appealed the decision. On March 10, 2011, the Court of Appeal rejected Parabole Réunion’s appeal.
Parabole Réunion also brought various proceedings seeking to obtain a statement recognizing the maintaining of the TPS Foot channel, among others, before
the High Court of Nanterre. On September 16, 2010, the Versailles Court of appeal rejected Parabole Réunion demands. Parabole Réunion appealed the decision
before the French Supreme Court.
Action brought by the French Competition Authority regarding practices in the pay-TV sector
On January 9, 2009, further to its voluntary investigation and a complaint by France Télécom, the French Competition Authority sent Vivendi and Groupe
Canal+ a notification of grievances. It alleges that Groupe Canal+ has abused its dominant position in certain pay-TV markets and that Vivendi and Groupe
Canal+ colluded with TF1 and M6 on the one hand, and with Lagardère, on the other. Vivendi and Groupe Canal+ denied these allegations.
On November 16, 2010, the Competition Authority rendered a decision in which it dismissed the grievance of collusion, in respect of all parties and other
grievances in respect of Groupe Canal+. The Competition Authority requested further investigation regarding fiber optic TV and catch-up TV, Groupe Canal+’s
exclusive distribution rights on channels broadcast by the group and by independent channels as well as the extension of exclusive rights on TF1, M6 and
Lagardère channels to fiber optic and catch-up TV. On December 17, 2010, France Télécom appealed the decision before the Paris Court of Appeal. Vivendi
and Groupe Canal+ joined these proceedings.
Inquiry into the implementation of certain undertakings given in connection with the combination of Canal Satellite and TPS
The French Competition Authority opened an inquiry regarding the implementation of certain undertakings given by Vivendi and Group Canal+ in connection
with the combination of TPS and Canal Satellite. The Authority notified to the parties its report dated February 21, 2011.
Complaints against music industry majors in the United States
Several complaints have been filed before the Federal Courts in New York and California against Universal Music Group, Warner Music, EMI, Bertelsmann
and Sony BMG, for alleged anti-competitive practices in the context of sales of CDs and Internet music downloads. These complaints have been consolidated
before the Federal Court in New York. The motion to dismiss filed by the defendants was granted by the Federal Court, on October 9, 2008, but this decision
was reversed by the Second Circuit Court of Appeals on January 13, 2010. Defendants filed a motion for rehearing which was denied. They filed a petition
with the US Supreme Court which was rejected on January 10, 2011.
Studio Infinity Ward, subsidiary of Activision Blizzard
After concluding an internal human resources inquiry into breaches of contract and insubordination by two senior employees at Infinity Ward, Activision Blizzard
terminated the employment of Jason West and Vince Zampella on March 1, 2010. On March 3, 2010, West and Zampella filed a complaint against Activision
Blizzard in Los Angeles Superior Court for breach of contract and wrongful termination. On April 9, 2010, Activision Blizzard filed a cross complaint against West
and Zampella, asserting claims for breach of contract and fiduciary duty. In addition, 38 current and former employees of Infinity Ward filed a complaint against
Activision Blizzard in Los Angeles Superior Court on April 27, 2010 for breach of contract and violation of the Labor Code of the State of California. On July 8, 2010,
an amended complaint was filed which added seven additional plaintiffs. They claim that the company failed to pay bonuses and other compensation allegedly
owed to them.
On December 21, 2010, Activision Blizzard filed a consolidated cross complaint in order to add Electronic Arts as a party, the discovery having shown the
complicity of Electronic Arts in the case. The Court set a trial date of May 23, 2011. Activision Blizzard does not expect these two lawsuits to have a material
impact on the company.
Investigations in Brazil
On November 13, 2009, following Vivendi’s acquisition of Global Village Telecom (Holding) S.A. (“GVT”), the CVM (the Brazilian financial markets authority) and
the Public Prosecutors of the State of Rio and of the State of Parana opened an investigation regarding the information provided by Vivendi about transactions it
carried out with certain GVT shareholders.
On May 17, 2010, Vivendi received a statement of grievance from the CVM to which it responded on September 27, 2010. The CVM complains that Vivendi did not
provide sufficient information concerning certain option agreements entered into between Vivendi and a third party in its press release dated November 13, 2009,
announcing the acquisition of control of GVT. Vivendi opposed the statement.
In December 2010, Vivendi reached a settlement with the CVM, for an amount of approximately €67 million. This puts an end to the proceedings with the CVM.
As stated under Brazilian law, this settlement does not imply the acknowledgement of any wrongdoing by Vivendi in the context of GVT’s acquisition, nor a
determination by the CVM of any violation of the Brazilian Stock Exchange regulations by Vivendi.
61
Vivendi Litigation
Actions related to the ICMS tax
GVT is party in various Brazilian States to several proceedings concerning the recovery of the “ICMS” tax (Impostos Sobre Circulaçãos de Mercadorias e
Prestaçãos de Serviços), a tax on operations relating to the circulation of goods and the supply of transport, communication and electricity services. As of
today, GVT has obtained favorable decisions in several States.
Action related to the FUST and FUNTTEL taxes in Brazil
The Brazilian tax authorities argue that the assessment of the taxes known as “FUST” (Fundo da Universalizaçãos dos Serviços de Telecomunicaçõs), a federal
tax to promote the supply of telecommunications services throughout the whole Brazilian territory, including in areas that are not economically viable and
“FUNTTEL” (Fundo para Desenvolvimento Tecnológioco das Telecomunicações), a federal tax to finance technological investments in Brazilian telecommunications
services should be based on the company’s gross revenue without deduction for price reductions or interconnection expenses and other taxes, which would lead
to part of that sum being subject to double taxation. GVT is challenging this interpretation and has secured a suspension of payment of the sums claimed by the
tax authority from the federal judge.
Proceedings brought against telecommunications operators in Brazil regarding the application of the PIS and COFINS taxes
Several proceedings were launched against all the Brazilian telecommunications operators including GVT, with a view to preventing invoices from being
increased by taxes known as “PIS” (Programa de Integraçãos Social) and “COFINS” (Contribuição para Financiamento da Seguridade Social), which are federal
taxes applying in particular to revenue from the provision of telecommunications services. GVT believes that its defenses are stronger than those of the historic
operators insofar as it has a more flexible license that allows it to set its own tariffs.
62
Section 4 Risk Factors
Legal risks
Vivendi has performed a review of risk factors that may have a negative impact on its businesses or results. It has not identified any material risks other than
those set out below.
The Risks Committee regularly assesses the potential risks that may have an impact on the businesses carried out by the Vivendi Group and the adequacy
of procedures to protect against such risks. It informs the Supervisory Board’s Audit Committee of its main conclusions and decisions.
A summary of the work performed by the Risks Committee is included in Chapter 3, Section 3.7 of this document.
Risks associated with regulations applicable to the Group’s operations
In the ordinary course of business, Vivendi is obliged to comply with complex, restrictive and evolving laws and regulations, particularly those that govern
the telecommunications and broadcasting sectors.
Substantial changes in the nature, interpretation or application of these laws and regulations by governmental, administrative, judicial or other authorities,
particularly with respect to competition and tax law, may result in Vivendi incurring additional costs or altering the products and services offered by the
company, which may materially impact its business, financial position, results and development prospects.
In addition, certain operations of the Group are dependent upon obtaining or renewing licenses issued by regulatory authorities (both in France and abroad,
and specifically: in France: the ARCEP – the French Telecommunications and Posts Regulator Authority, and the CSA – the Superior Audiovisual Council; in
Morocco: the ANRT – the National Telecommunications Regulatory Agency, and in Brazil: the ANATEL – the National Telecommunications Agency). The process
of obtaining or renewing such licenses can be long, complex and costly. If Vivendi were unable to obtain or retain the licenses required to conduct, continue or
expand its operations in a timely manner, its ability to achieve its strategic objectives may be impaired.
A detailed description of the regulatory environment applicable to each of the Group’s operations is included in section 2 of this chapter.
Risks associated with litigation
The Group is, or is likely to become, involved in a number of contentious proceedings or investigations, filed by subscribers, consumer associations, competitors,
shareholders or regulatory and tax authorities. When the Group fails to negotiate an amicable settlement, damages and interest may be claimed or penalties imposed.
The main legal proceedings or investigations in which the Group is involved are described in Note 27 of the Notes to the Consolidated Financial Statements for
the year ended December 31, 2010 and in the “Litigation” section of this chapter.
Vivendi recognizes a provision for expenses that may result from a proceeding whenever a risk becomes likely to materialize and when it is possible to estimate
the potential cost associated with such risk. With the exception of the main legal proceedings and investigations described in this section and in Note 27 of the
Notes to the Consolidated Financial Statements for the year ended December 31, 2010 (Chapter 4), Vivendi considers it unlikely that current proceedings will have
a significant negative impact on the Group’s financial position.
Risks associated with commitments given by Vivendi
Vivendi and its subsidiaries have entered into a number of conditional commitments, the most significant of which are described in Note 26 of the Notes to the
Consolidated Financial Statements for the year ended December 31, 2010. Certain of these commitments are unlimited in their duration or amount. If Vivendi
were obliged to make a payment in respect of one or more of these contingent liabilities, such an obligation may have a negative impact on its financial results
and financial position.
Risks Associated with the Group’s Operations
Risks associated with piracy and counterfeiting
Over the past few years, the reduction in the cost of computer and electronic equipment and associated technologies has facilitated the unauthorized
reproduction of music and audiovisual works and games. At the same time, increased access to high-speed Internet connections has enabled, and continues
to enable, computer users to share such works more easily (and in greater number), without the copyright holder’s authorization and without paying royalties.
Vivendi is dependent on the decisions of public or administrative authorities and their determination to find effective means to fight piracy. Persistent difficulties
in passing and applying suitable legislation or in enforcing court rulings, particularly in certain regions of the world where piracy is endemic, constitute a threat
to Vivendi’s businesses, which depend heavily on the intellectual property rights owned by or licensed to the Group.
63
Vivendi Risk Factors
The decline in the market for recorded music may therefore continue in the next few years and could continue to affect UMG’s results if Vivendi does not
succeed in finding ways to protect its businesses against piracy and counterfeiting. For the same reasons, in the absence of adequate means to prevent piracy
and counterfeiting, Vivendi’s operations related to the production and distribution of audiovisual content and video games publishing may suffer a significant
decline in revenues.
Section 2 of this chapter contains a detailed analysis of piracy issues and measures taken by each of the Group’s business units to fight it.
Risks associated with intensified commercial and technical competition
Vivendi’s businesses face strong competition, which may intensify in the near future due to the trend towards industry concentration among existing
companies or the entry of new competitors in the relevant markets. Growing competition exerts considerable pressure on Vivendi, which may lead to
a loss in market share if Vivendi is no longer able to supply products and services that are sufficiently competitive in terms of price and quality.
In particular, Vivendi’s development depends on its ability to adapt the products and services it offers to the requirements of increasingly demanding customers,
in industries distinguished by rapid technological developments. The need for Vivendi to respond to such requirements and advances, or even in some cases to
anticipate them, may lead to the Group making substantial investment without any assurance that the new products and services developed and offered will not
become obsolete within a short period of time.
Risks associated with the lack of commercial success of recorded music, films and video games produced, published or distributed
by the Group
The production and distribution of musical and audiovisual content and video games publishing represent a substantial proportion of Vivendi’s revenues.
The commercial success of these works is dependent upon the public’s response, which may not always be predicted, the existence and success of competing
entertainment offers, and general economic circumstances.
Finally, when these operations are based on content provided by third parties, no assurance can be given that such third parties will always agree to transfer
their rights on financial and commercial terms acceptable to Vivendi.
Conducting operations in various countries is subject to additional risks
Vivendi conducts its business in various markets throughout the world. The main risks associated with business being conducted on an international scale are as follows:
• the local economic and political situation;
• exchange rate fluctuations;
• restrictions on capital repatriation;
• unexpected changes in the regulatory environment;
• the various tax systems that may have an adverse effect on Vivendi’s operating results or cash flow, and in particular regulations relating to transfer costs
and the withholding tax on the repatriation of funds; and
• tariff barriers, customs duties, export controls and other trade barriers.
Vivendi may not be able to protect itself against such risks without incurring additional costs.
Potential health risks posed by networks, mobile phones or Wi-Fi terminals
Over the past few years, concerns have been expressed on an international level as to the potential risks posed to human health by electromagnetic radiation from
mobile phones and mobile transmission sites. Vivendi is not currently aware of any tangible evidence that demonstrates the existence of risks to human health
associated with the use of mobile phones, the emission of radio waves or electromagnetic fields.
Nevertheless, the perception of such risks by the public may have a material negative impact on Vivendi’s results or financial position, particularly if, as a
consequence, the number of Vivendi customers decreased significantly, the consumption of its products and services fell, or legal claims were brought against
the company. Furthermore, Vivendi may not be certain that in the future, medical or scientific research will not produce evidence of a link between the emission
of radio waves and risks to health, which may have a negative impact on Vivendi’s operations and its financial position.
The “Regulatory Environment” section of this chapter contains a detailed description of these risks and of actions being taken by each of the Group’s businesses
to address them.
64
Industrial Risks or Risks Associated with the Environment
The Group’s operations do not pose any major industrial or environmental risks. In fact, the Group’s operations are by their very nature largely non-manufacturing
and a large proportion of the Group’s assets are intangible. However, the Group remains alert to any environmental damage that may arise or be discovered in the
future, and has set up programs intended to ensure the application of regulations relating to this area (see the Raw Materials section of this chapter).
Risks Associated with the Current Economic and Financial Situation
The ongoing economic crisis has resulted in a severe contraction of credit markets, a high level of volatility in stock markets and a reduction in growth forecasts. The
unfavorable circumstances of the economic recession, in particular the reduction in consumers’ purchasing power and level of confidence, could lead to customers
postponing or reducing their expenditure on the products and services offered by the Group or affect their ability to pay for them, which in turn may have a negative
impact on Vivendi’s revenues and results.
Each year, Vivendi undertakes impairment tests on goodwill and assets with definite or indefinite lives, in order to assess whether their book value exceeds their
recoverable value. Current economic circumstances may cause Vivendi to recognize impairment losses for such assets.
To date, the Vivendi Group’s resistance to the economic and financial crisis has confirmed the relevance and soundness of its economic model, which is based on
subscriptions, and the strategy implemented over the last few years in order to strengthen and develop its core businesses in France and worldwide, particularly
those in emerging countries.
Market risks
Note 24 of the Notes to the Consolidated Financial Statements for the year ended December 31, 2010 contains a detailed analysis of market risks (e.g., interest and
exchange rates, liquidity and shares).
65
Section 1
General Information about the Company
68
1.1.
1.2.
1.3.
1.4.
68
68
68
Corporate and Commercial Name
Place of Registration and Registration Number
Date of Incorporation and Term
Registered Office, Legal Form and Legislation Applicable
to Vivendi’s Business
1.5. Fiscal Year
1.6. Access to Legal Documents and Regulated Information
68
68
68
Section 2
Additional Information about the Company
Section 3
68
2.1. Memorandum and By-Laws
68
2.1.1. Corporate Purpose
68
2.1.2. Rights, Preferences and Restrictions Attached to the Company’s
Shares and to Each Class of Existing Shares, if Applicable
68
2.1.3. Action Necessary to Change the Rights of Shareholders
69
2.1.4. Shareholders’ Meetings
69
2.1.5. Fixation, Allocation and Distribution of Net Earnings
69
2.1.6. Provisions Having the Effect of Delaying, Deferring or Preventing
a Change in Control
70
2.1.7. Provisions Governing the Ownership Threshold Above Which
Shareholder Ownership Must be Disclosed
70
2.1.8. Provisions Governing Changes in Share Capital Where such
Conditions are More Stringent than Required by Law
70
2.2. Share Capital
71
2.2.1. Amount of Issued Share Capital
71
2.2.2. Shares not Representing Capital
71
2.2.3. Amount of Authorized but Non-Issued Capital
71
2.2.4. Shares Held by the Company
72
2.2.5. Convertible Securities, Exchangeable Securities or
Warrant Securities
73
2.2.6. Stock Option Plans
74
2.2.7. Performance Shares
74
2.2.8. Acquisition Rights or Obligations in Respect of Authorized but
Non-Issued Capital
75
2.2.9. Conditional or Unconditional Options or Agreements on any
Member of the Group
75
2.2.10. Changes in Share Capital over the Last Five Years
75
2.2.11. Market Information
77
2.2.12. ADR (American Depositary Receipt) Program
78
2.3. Major Shareholders
78
2.3.1. Share Ownership and Voting Rights
78
2.3.2. Pledge of Company Shares
79
2.3.3. Control of the Company – Shareholders’ Agreements
79
2.3.4. Notices made to the Company regarding Legal and
Statutory Thresholds
79
2.3.5. Changes in Share Ownership and Voting Rights over the Last Three Years
(as of December 31, 2010)
79
Appendix
80
3.1.
3.1.1.
3.1.2.
3.2.
3.2.1.
3.2.2.
3.2.3.
3.2.4.
3.3.
3.3.1.
3.3.2.
3.3.3.
3.3.4.
3.3.5.
3.3.6.
3.3.7.
3.4.
3.4.1.
3.5.
3.5.1.
3.5.2.
3.6.
3.6.1.
3.6.2.
3.6.3.
3.7.
3.7.1.
3.7.2.
3.7.3.
3.8.
Directors, Senior Management and Supervisory Bodies
Supervisory Board
Management Board
Compensation of Directors and Officers
Compensation of the Members of the Supervisory Board
and its Chairman
Compensation of the Members and the Chairman of the
Management Board
Summary of the Commitments Issued in Favor of the Chairman
and the Members of the Management Board (Information
required pursuant to Table 10 of the AMF Recommendations)
Compensation of Group Senior Executives
Grants of Stock Options and Performance Shares
Stock Options Granted
Grant of performance shares
Options Exercised in 2010 by Corporate Officers (Information
required pursuant to Table 5 of the AMF recommendations)
Major option awards and Options Exercised in 2010
(Information required pursuant to Table 9 of the
AMF Recommendations)
New provisions implemented in 2011
Conditions under which Corporate Officers Hold Shares
Pursuant to the Exercise of Stock Options and Grants of
Performance Shares
Conditions Specific to Vivendi
Trading in Company Securities
Trading in securities conducted by corporate officers
Compliance Program
Reasons for the Program
Objectives
Financial Information and Communication
Procedures Committee
Composition
Powers
Activity in 2010
Risks Committee
Composition
Powers
Activity in 2010
General Management
82
82
82
95
101
101
102
106
107
107
108
110
111
112
112
112
112
112
113
113
114
114
114
114
114
115
115
115
115
115
115
Section 4
Report by the Chairman of the Vivendi Supervisory Board on
Corporate Governance, Internal Audits and Risk
Management – Fiscal Year Ended December 31, 2010
116
4.1. Corporate Governance
4.1.1. Conditions Governing the Preparation and Organization of the
Work of the Supervisory Board
4.1.2. Determination of deferred compensation and benefits granted
to the members of the Management Board and its Chairman
4.1.3. Holding Periods for Shares Obtained upon the Exercise of Stock
Options and for Performance Shares held by Board Members and
Corporate Officers
4.1.4. Terms and Conditions Governing Shareholders’ Attendance at
General Meetings
4.2. Internal control procedures
4.2.1. Definition and Objectives of Internal Control
4.2.2. Scope of Internal Control
4.2.3. Internal Control Components
4.3. Risk Monitoring and Management
4.3.1. Control Activities
4.3.2. Internal Control Monitoring
4.4. Key Processes for Financial and Accounting Information
4.5. Information and Communication
4.6. Sustainable development and social responsibility
4.7. Prospects
116
116
116
116
116
117
117
117
117
118
119
120
121
122
122
123
Section 5
Statutory Auditors’ Report, prepared in accordance
with Article L.225-235 of the French Commercial Code,
on the Report Prepared by the Chairman of the
Supervisory Board of Vivendi S.A.
124
Information about the Company –
68
Section 1 General Information about the Company
1.1. Corporate and Commercial Name
Pursuant to Article 1 of Vivendi’s by-laws, the corporate name of the company is Vivendi.
1.2. Place of Registration and Registration Number
The company is registered with the Registre du Commerce et des Sociétés de Paris (Paris Commercial and Corporate Registry) under reference number 343 134 763. Its
Siret number is 343 134 763 00048 and its APE code is 6420Z.
1.3. Date of Incorporation and Term
As set forth in Article 1 of Vivendi’s by-laws, the company’s term is 99 years beginning on December 18, 1987. Thus, it will expire on December 17, 2086, except in the
event of extension or early dissolution.
1.4. Registered Office, Legal Form and Legislation Applicable to Vivendi’s Business
Pursuant to Article 3 of Vivendi’s by-laws, the registered office of the company is located at 42, avenue de Friedland – 75380 Paris Cedex 08 – France.
Pursuant to Article 1 of Vivendi’s by-laws, Vivendi is a limited liability company (société anonyme) with a Management Board (Directoire) and a Supervisory Board
(Conseil de surveillance). The company is governed by the French legislative and regulatory provisions on corporations and, in particular, by the provisions of the French
Commercial Code (Code de Commerce).
1.5. Fiscal Year
Pursuant to Article 18 of Vivendi’s by-laws, the company’s fiscal year shall commence on January 1 and end on December 31 of each year.
1.6. Access to Legal Documents and Regulated Information
Legal documents regarding the company are available for review at the company’s registered office. Permanent or ongoing regulated information may be found on the
company’s website (www.vivendi.com) under “Regulated Information”.
Section 2 Additional Information about the Company
2.1. Memorandum and By-Laws
2.1.1. Corporate Purpose
Pursuant to Article 2 of Vivendi’s by-laws, the main corporate purpose of the company, directly or indirectly, in France and in all other countries is as follows:
• to provide any communication and telecommunication activities, directly or indirectly, and any interactive services, to individual, business or public sector customers;
• to market any products and services related to the foregoing;
• to engage in any commercial, industrial, financial, share and real estate transactions, directly or indirectly, related to the aforementioned purpose or to any other
similar or related purpose, or contributing to the achievement of such purpose; and
• more generally, the management and acquisition, either by subscription, purchase, contribution, exchange or through any other means, of shares, bonds and any
other securities of companies already existing or yet to be formed, including the right to sell such securities.
2.1.2. Rights, Preferences and Restrictions Attached to the Company’s Shares and to Each Class of Existing Shares,
if Applicable
Pursuant to Articles 4 and 5 of Vivendi’s by-laws, the shares are all of the same class and may be held in either registered form or bearer form, subject to applicable
laws and regulations.
Pursuant to Article 6 of Vivendi’s by-laws, each share carries a right of ownership of the company’s assets and liquidation surplus, in a proportion equal to the portion
of the share capital it represents. Whenever the accumulation of several shares is necessary to exercise any rights, shareholders may only exercise such rights if they
combine the necessary shares. Subscription rights attached to shares belong to the usufruct holder (“usufruitier”).
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Vivendi Additional Information about the Company
2.1.3. Action Necessary to Change the Rights of Shareholders
Vivendi’s by-laws do not contain any provisions that are more restrictive than those required by law, with regard to any changes in the company’s share capital
or to the rights attached to the company shares.
2.1.4. Shareholders’ Meetings
Pursuant to Article 16 of Vivendi’s by-laws, Shareholders’ Meetings are convened and held in accordance with applicable law.
Shareholders’ Meetings are held at the company’s registered office or at any other place indicated in the meeting notice. When convening such a meeting,
the Management Board may decide to publicly broadcast the Shareholders’ Meeting in full, via videoconference or teletransmission. If applicable, this decision
shall be published in the meeting notice.
Two members of the Workers’ Committee, appointed by said Committee, may also attend Shareholders’ Meetings. The Chairman of the Management Board
or any other authorized person notifies the Workers’ Committee of the date and location of Shareholders’ Meetings by any means.
Each shareholder, without regard to the number of shares held, is entitled, upon proof of his/her identity and capacity as a shareholder, to participate in
Shareholders’ Meetings, subject to (i) the recording of his/her shares on the third business day preceding the Shareholders’ Meeting (the “Record Date”),
at 0:00 am (Paris time), whereby:
• registered shareholders shall be comprised of those shareholders identified in the registered share account on file with the company; and
• bearer shareholders shall be comprised of those shareholders identified as holders of record in the bearer share account held by their authorized
intermediary; and
(ii) if necessary, the provision to the company of any documents required to prove such shareholders’ identity, in accordance with applicable law.
The registration or recording of shares in the bearer share account held by the authorized intermediary is authenticated by a shareholding certificate
(“attestation de participation”) delivered by said intermediary in accordance with legal and statutory provisions.
Pursuant to Article 17 of Vivendi’s by-laws, voting rights attached to shares belong to usufruct holders (“usufruitiers”) in Ordinary Shareholders’ Meetings
and to legal owners of title (“nu-propriétaires”) in Extraordinary Shareholders’ Meetings, unless otherwise agreed by both parties, provided that the company
is notified of such agreement by said parties.
Subject to applicable laws and regulations, shareholders may send their proxy and voting forms for any Shareholders’ Meeting by mail, either in paper form or,
where resolved by the Management Board and published in the notice of meeting, by teletransmission. Proxy and voting forms must be received by the company
prior to 3:00 pm (Paris time) on the day prior to the Shareholders’ Meeting.
The proxy or voting form may, if necessary, contain the shareholder’s electronic signature, authenticated via a reliable security process, enabling the identification
of the shareholder and his or her vote.
The Management Board may decide to permit shareholders to participate and vote in any Shareholders’ Meetings by videoconference and/or teletransmission,
subject to applicable laws and regulations. In such case, shareholders participating in the Shareholders’ Meeting by videoconference or by any other means of
telecommunication, in accordance with applicable laws and regulations, shall be deemed to be present at the meeting for purpose of calculating quorum and
majority requirements.
Shareholders’ Meetings are chaired by the Chairman of the Supervisory Board.
Each shareholder is entitled to a number of votes equal to the number of shares he/she owns or represents.
2.1.5. Fixation, Allocation and Distribution of Net Earnings
Pursuant to Article 19 of Vivendi’s by-laws, the statement of income summarizes income and expenses for the fiscal year, showing statutory net income for the fiscal
year as the difference between the two, after deducting amortization, depreciation and provisions.
At least 5% of the fiscal year’s earnings, reduced, where applicable, by deferred losses, shall be withheld for allocation to the statutory reserve fund. This withholding
ceases to be mandatory when the statutory reserve fund reaches an amount equal to 10% of the share capital. Such deductions shall resume if, for any reason, the
legal reserve falls below this percentage.
The Shareholders’ Meeting shall set aside such amounts as the Management Board deems appropriate for transfer to contingency funds, ordinary or extraordinary
revenue reserves, retained earnings or for distribution.
70
Distributable earnings are equal to the net income for the fiscal year, less losses carried forward and amounts allocated to reserves, pursuant to applicable law
or the company’s by-laws, plus earnings carried forward from previous fiscal years.
Dividends are first paid out of current earnings.
Except in the event of a reduction in share capital, no dividends shall be distributed to shareholders when shareholders’ equity is, or would become as a result of
such distribution, less than the amount of the share capital plus reserves which are not permitted to be distributed under applicable law or the company’s by-laws.
Revaluation surpluses may not be distributed, but may be wholly or partially capitalized.
The Shareholders’ Meeting may resolve to distribute funds from available reserves by specifically identifying the reserve line items from which such funds
shall be distributed.
The terms of dividend payments are determined by the Shareholders’ Meeting or, upon failing to make such determination, by the Management Board. Dividends
must be paid out no later than nine months following the end of the fiscal year unless the period is extended by court order.
The Shareholders’ Meeting has the right to grant each shareholder the option, with respect to all or part of the annual dividend or interim dividend distributed,
to receive such dividend in the form of cash, shares or payment in kind.
Dividends remaining unclaimed after a five-year period from the dividend payment dates are no longer distributable under applicable statutory limitation rules.
2.1.6. Provisions Having the Effect of Delaying, Deferring or Preventing a Change in Control
Vivendi’s by-laws do not contain any provision that would have the effect of delaying, deferring or preventing a change in control of the company.
2.1.7. Provisions Governing the Ownership Threshold Above Which Shareholder Ownership Must be Disclosed
Pursuant to Article 5 of Vivendi’s by-laws, the company may, at any time, in accordance with applicable laws and regulations, request that the relevant central depository
for financial instruments provide it with information relating to company securities conferring a voting right (either immediately or in the future) at Shareholders’ Meetings.
Personal data and information obtained are used solely for the purpose of identifying the owners of bearer shares and analyzing Vivendi’s share ownership structure
on any given date. In accordance with the provisions of the Law dated January 6, 1978, owners of securities have the right to access, amend and delete any personal
information about themselves. To do so, a request must be submitted to Vivendi’s Legal Department or to the following email address: [email protected].
Failure by shareholders or their intermediaries to comply with the above requirement may lead to the suspension or suppression of dividends and/or voting rights,
as permitted by law.
Any person, acting alone or in concert, who directly or indirectly becomes the holder of a fraction of the share capital, voting rights or securities giving rights to the
share capital of the company equivalent to, or in excess of, 0.5% or a multiple thereof, shall send a notice to the company, by registered letter with acknowledgment
of receipt, within 15 calendar days of crossing any of these thresholds, specifying the aggregate number of shares, voting rights or securities giving rights to the share
capital of the company which such person directly or indirectly holds, whether alone or in concert.
A person who fails to comply with this notification requirement is subject to penalties in accordance with applicable law, upon the request, as recorded in the minutes
of the Shareholders’ Meeting, of one or more shareholders holding at least 0.5% of the company’s share capital.
Any person, acting alone or in concert, shall inform the company within 15 calendar days if the percentage of share capital or voting rights held by such person falls
below any of the above-mentioned thresholds.
2.1.8. Provisions Governing Changes in Share Capital Where Such Conditions are More Stringent than Required by Law
None.
71
2.2. Share Capital
2.2.1. Amount of Issued Share Capital
As of December 31, 2010, the company’s share capital amounted to €6,805,354,094.00 divided into 1,237,337,108 shares, with a value of €5.50 per share.
All shares may be held in registered or bearer form and are freely negotiable. The shares are traded on Euronext Paris (Compartment A) (ISIN Code: FR0000127771).
2.2.2. Shares not Representing Capital
None.
2.2.3. Amount of Authorized but Non-Issued Capital
Details of delegations of authority and authorizations adopted by the Combined Shareholders’ Meetings of April 24, 2008 and April 30, 2009 and proposed to the
Combined Shareholders’ Meeting to be held on April 21, 2011 are set out below.
Issues of securities with preferential subscription rights maintained
Transactions
Capital increase (ordinary shares and securities
giving right to shares)
Capital increase by incorporation
of reserves
Source
(Resolution number)
11th - 2009
14th - 2011
17th - 2009
20th - 2011
Duration of the authorization
and expiry date
Maximum nominal amount of share capital increase
26 months (June 2011)
€1.5 billion, i.e., 23.31% of the share capital
(a, c) €1.5 billion, i.e., 22.04% of the share capital
€800 million, i.e., 12.42% of the share capital
(b) €1 billion, i.e., 14.69% of the share capital
Source
(Resolution number)
and expiry date
Maximum nominal amount of share capital increase
12th - 2009
15th - 2011
14th - 2009
17th - 2011
€800 million, i.e., 12.42% of the share capital
(b, c) €1 billion i.e., 14.69% of the share capital
10% of the share capital
(d) 10% of the share capital
Source
(Resolution number)
and expiry date
Features
18 months (Oct 2010)
Maximum of 2.5% of the share capital
on the Management Board’s decision date
(b, e) Maximum of 2% of the share capital on the
Management Board’s decision date
Maximum of 2.5% of the share capital
at the Management Board’s grant date
(b, f) Maximum of 1% of the share capital
on the Management Board’s decision date
Maximum of 0.5% of the share capital at grant date
(b, g) Maximum of 1% of the share capital at grant date
Issues of securities without preferential subscription rights
Transactions
Capital increase (ordinary shares and any securities
giving right to shares)
Contributions in kind to the company
Issues reserved for employees of Vivendi
Transactions
Share capital increase through the Group’s Savings
Plan (PEG)
Stock options (subscription options only)
Exercise price fixed without discount
Allotment of existing or future bonus shares
th
15 - 2009
16th - 2009
18th - 2011
19th - 2011
17th - 2008
12th - 2011
18th - 2008
13th - 2011
72
Share repurchase program
Transactions
Source
(Resolution number)
and expiry date
Features
9th - 2009
10th - 2011
10th- 2009
11th - 2011
Maximum purchase price: €35
Maximum purchase price: €32
10% of the share capital over a 24-month period
10% of the share capital over a 24-month period
Share repurchases
Share cancellations
(a) Aggregate maximum amount for capital increases, all transactions included.
(b) This amount shall be deducted from the aggregate nominal amount of €1.5 billion set forth in the 14th resolution of the 2011 Combined Shareholders’ Meeting.
(c) This amount could be increased to the upper limit of 15% in the event that the issue is oversubscribed (16 th resolution – 2011).
(d) This amount shall be deducted from the aggregate nominal amount of €800 million set forth in the 15th resolution of the 2011 Combined Shareholders’ Meeting.
(e) Used in 2009 and 2010 for, respectively, 4.86 million and 7.14 million shares, i.e., 0.97% of share capital.
(f) Used in 2009 and 2010 for, respectively, 6.56 million and 5.30 million shares, i.e., 0.96% of share capital.
(g) Used in 2009 and 2010 for, respectively, 0.567 million and 1.08 million shares, i.e., 0.13% of share capital.
2.2.4. Shares Held by the Company
2.2.4.1. Summary of the Previous Share Repurchase Program
Aggregate number of purchases and sales/transfers of shares from October 23, 2009 until October 25, 2010 (excluding liquidity agreement)
Number of shares
Average price per share (in euros)
Total value (in euros)
Purchases
Transfers/Sales
None
na
na
None
na
na
na: not applicable.
Number of shares cancelled during the last 24 months: None.
2.2.4.2. Aggregate number of purchases and sales/transfers from January 1, 2010 until December 31, 2010 (excluding liquidity agreement)
Number of shares
Purchases
Transfers/Sales
None
na
na
None
na
na
na: not applicable.
2.2.4.3. Current Share Repurchase Program
A share repurchase program was implemented on October 25, 2010, pursuant to the authorization granted under the ninth resolution of the Ordinary Shareholders’
Meeting held on April 29, 2010 and upon delegation by the Management Board dated October 25, 2010.
The maximum percentage of repurchases authorized is 10% of the share capital, with a maximum purchase price of €30 per share, in accordance with the maximum
amount approved by the Shareholders’ Meeting.
When it was implemented, the sole purpose of this repurchase program was the market making of Vivendi shares through a financial intermediary pursuant to
a liquidity agreement established in compliance with the AMAFI professional Code of Ethics approved by the Autorité des Marchés Financiers (AMF). At its meeting
held on January 25, 2011, the Management Board resolved to broaden the purpose and scope of this share repurchase program to cover bonus awards of performance
shares, in accordance with the Supervisory Board’s decision of December 16, 2010. The 2009 and 2010 plans, as adjusted and in the process of being acquired
represent, respectively, 0.593 million and 1.166 million shares, for a total of 1.759 million shares. The maximum unit purchase price was set at €25, for a maximum
aggregate amount of €43.97 million.
73
2.2.4.4. Treasury Shares (Excluding Liquidity Agreement)
Position as of December 31, 2010
As of December 31, 2010, Vivendi held 79,114 of its own shares, each having a value of €5.50, representing 0.0064% of the share capital of the company, all reserved
for the hedging of stock purchase plans. As of December 31, 2010, the book value of shares held by the company amounted to €1.9 million, representing a market value
of €1.6 million at the same date. These 79,114 shares will be cancelled subject to the adoption of the eleventh resolution of the Combined Shareholders’ Meeting to be
held on April 21, 2011.
2.2.4.5. Aggregate number of Purchases and Sales/Transfers of Shares from January 1, 2011 until February 28, 2011
(Excluding Liquidity Agreement)
Number of shares
Purchases (1)
Transfers/Sales
1,759,000
21.27
37,421,845
None
na
na
(1) Purchases made from January 26th to February 8 th, 2011 for the hedging of the 2009 and 2010 performance share plans.
As of February 28, 2010, Vivendi held 1,838,114 of its own shares, representing 0.15% of the share capital of the company.
2.2.4.6. Liquidity Agreement
Since January 3, 2005, Vivendi has implemented a liquidity agreement established in compliance with the AMAFI Code of Ethics. The term of this agreement
is one year, renewable by tacit agreement.
In 2010, pursuant to the implementation of this liquidity agreement, Vivendi repurchased a total of 4,652,803 shares, representing 0.38% of the share capital
of the company, for €89.6 million and sold a total of 4,652,803 shares for €90.2 million.
In connection with this liquidity agreement, as of December 31, 2010, the following resources were held in the liquidity account of the company: 0 shares and
€50.6 million.
In 2010, the company recognized capital gains in the amount of €0.6 million pursuant to the liquidity agreement.
For 2010, the management fee for the liquidity agreement amounted to €180,000 (excluding VAT).
2.2.4.7. Cross-Shareholding
As of December 31, 2010, Vivendi’s subsidiaries held 450 shares of the company.
2.2.4.8. Open Positions on Derivative Financial Instruments as of December 31, 2010
None.
2.2.5. Convertible Securities, Exchangeable Securities or Warrant Securities
2.2.5.1. Bonds Convertible into New Shares and/or Exchangeable into Existing Shares (OCEANEs)
There are no outstanding OCEANEs.
2.2.5.2. Bonds Mandatorily Redeemable in Shares (ORAs)
There are no outstanding ORAs.
2.2.5.3. Warrants (BSAs)
There are no outstanding BSAs.
74
2.2.6. Stock Option Plans
2.2.6.1. Grant Criteria
Grants of purchase or subscription options are based on three criteria: (i) level of responsibility, (ii) individual performance; and (iii) rewarding the loyalty of highpotential managers.
Since 2002, only stock subscription plans have been in place. These plans have a duration of ten years, with the exception of the January 2003 plan, which had
a duration of eight years and ended on January 29, 2011.
As of December 31, 2010, 48,921,919 options were outstanding under all existing stock option plans (after deducting the number of stock options exercised or
cancelled pursuant to the termination of employment of certain beneficiaries), representing a maximum nominal share capital increase of €269.07 million or 3.95%
of the company’s share capital.
As a result of the termination of Vivendi’s ADR program and its delisting from the NYSE in 2006, stock options exercisable into ADRs granted to certain directors and
employees of the Group residing in the United States were converted into Stock Appreciation Rights (SARs), instruments that settle in cash and do not themselves
represent shares and therefore do not result in a share capital increase. The trading value of the SARs is the average of the high and low prices of Vivendi’s ordinary
shares as quoted on Euronext Paris on that trading day, converted from Euros to US dollars based on the daily Euro/US dollar exchange rate as published by the
European Central Bank on the date of exercise of the SAR.
Stock-option and SAR plans for the benefit of group employees having a duration of eight years were implemented in 2002 and ended in 2010. No options have been
exercised. Consequently, 326,871 options and 7.18 million SARs were cancelled in 2010.
2.2.6.2. Key Features of the Plans
Until 2007, one-third of the options vested annually, over three-year periods. The options are exercisable on one or more occasions up to two-thirds of the total grant
two years after the date of grant and up to 100% three years after grant date.
Since 2007, stock options are fully acquired by the beneficiaries after a three-year period and may be exercised on one or more occasions. Shares resulting from the
exercise of the options can be freely transferred, subject, for beneficiaries who are French tax residents, to the expiration of the beneficial holding period applicable
under French tax law (currently a four-year period).
Since 2009, as decided at the Combined Shareholders’ Meeting of April 24, 2008, the grant of options is subject to the same performance conditions (evaluated over one
year) and quantitative methods of allocation as those used for performance shares (see paragraph 3.3). They are based on the three criteria determined by the Supervisory
Board and they are weighted as follows: adjusted net income (50%), cash flow from operations (30%) and the performance of Vivendi shares based on a comparison of
three trading indices: DJ Stoxx Media, DJ Stoxx Telco and CAC 40 (20%).
Beginning with the Combined General Meeting to be held on April 21, 2011, the final grant of stock options will be effective based on the achievement of the
aforementioned goals, as assessed over a two-year period.
For all of the plans, in the event of a tender offer for Vivendi shares, the options will immediately vest and become immediately exercisable and the shares will be
unconditionally transferrable.
2.2.7. Performance Shares
Since 2006, performance shares are granted subject to the satisfaction of conditions linked to targets for certain financial indicators for the year in which they are
awarded. These were the Group’s adjusted net income and operating cash flow. In addition, for performance shares granted since 2009, the performance of Vivendi
shares against three trading indices (DJ Stoxx Media, DJ Stoxx Telco and CAC 40) is an additional indicator that has been used. All performance shares are definitively
acquired if the weighted total of the three indicators reaches or exceeds 100%; 50% of the performance shares are definitively acquired if the weighted total of the
three indicators achieves the value relating to the thresholds (50%); and no shares are awarded if the weighted total of the three indicators is lower than the value
relating to the thresholds (50%).
The performance shares vest at the end of a period of two years from the grant dates (the “acquisition period”) subject to the satisfaction of presence
and performance conditions over a period of two years, as described above.
The shares must then be retained by the beneficiaries for an additional two-year period following the acquisition date.
In 2010, 429,078 shares were issued at the end of the acquisition period in relation to performance shares awarded under the 2008 plans and 29,976 rights
to performance shares were cancelled due to the termination of certain beneficiaries.
75
For more details, please refer to section 3.3.2 below and to the appendix of this section.
2.2.7.1. Adjustment of rights following payment of the 2010 dividend by withdrawal from the reserves
In order to take into account the impact of the payment of the 2009 dividend by a withdrawal from the reserves, and pursuant to Articles L 225-181, L 228-99,
R 225-140 and R 228-91 of the French Commercial Code, the option and performance share plans were adjusted.
This adjustment, which was made to allow beneficiaries to invest the same amount as specified at the time of grant, entailed:
• an increase in the number of options granted and a reduction in their exercise price, and
• an increase in the number of performance share rights for the 2009 and 2010 plans.
The adjustment ratio was calculated based on the weighted average of Vivendi’s share price on the Euronext Paris market over the 20 trading sessions preceding
the coupon detachment date of May 6, 2010, for a dividend payment on May 11, 2010. The ratio is 0.92986.
2.2.8. Acquisition Rights or Obligations in Respect of Authorized but Non-Issued Capital
None.
2.2.9. Conditional or Unconditional Options or Agreements on any Member of the Group
None.
2.2.10. Changes in Share Capital over the Last Five Years
Amount
Transactions
Share capital as of December 31, 2005
Stock option exercises
ORAs redemption
ORAs redemption
ORAs redemption
ORAs redemption
Cancellation – Reallocation
2006 Group Savings Plan
ORAs redemption
ORAs redemption
Cancellation – Reallocation
Cancellation
Successive amounts of share capital
Date
Share
Nominal
value in
euros
Premium
per share
(in euros)
Number of
issued
shares
Total number
of shares
outstanding
In euros
12/31/05
01/31/06
02/28/06
02/28/06
03/31/06
03/31/06
04/30/06
04/30/06
05/31/06
05/31/06
06/30/06
06/30/06
07/19/06
07/30/06
08/30/06
09/30/06
10/30/06
11/30/06
11/30/06
11/30/06
12/31/06
01/31/07
02/28/07
03/30/07
03/30/07
04/30/07
05/31/07
06/30/07
18/07/07
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
na
* 8,90
* 9,64
* 10,90
* 9,45
* 8,90
* 11,22
15,22
* 9,03
* 8,90
* 8,52
* 7,43
na
* 7,02
* 10,05
* 10,40
* 9,07
na
* 9,15
* 9,70
* 9.44
19.10
na
116,465
19,532
4,340
152,440
224,003
94,680
40
40,500
1,600
258 180
(229,983)
1 471,499
76,650
13,333
214,560
765,666
327,470
4,316,085
(4,530,645)
220,000
165,416
12,500
58,992
(1,300,389)
426,164
557,978
5,462,245
1,276,227
1,153,477,561
1,153 593,786
1,153,613,318
1,153,617,658
1,153,770,098
1,153,994,101
1,154,088,781
1,154,088,821
1,154,129,321
1,154,130,921
1,154,389,101
1,154,159,118
1,155,630,617
1,155,707,267
1,155,720,600
1,155,935,160
1,156,700,826
1,157,028,296
1,161,344,381
1,156,813,736
1,157,033,736
1,157,199,152
1,157,211,652
1,157,270,644
1,155,970,255
1,156,396,419
1,156,954,397
1,162,416,642
1,163,692,869
6,344,126,585.50
6,344,765,823.00
6,344,873,249.00
6,344,897,119.00
6,345,735,539.00
6,346,967,555.50
6,347,488,295.50
6,347,488,515.50
6,347,711,265.50
6,347,720,065.50
6,349,140,055.50
6,347,875,149.00
6,355,968,393.50
6,356,389,968.50
6,356,463,300.00
6,357,643,380.00
6,361,854,543.00
6,363,655,628.00
6,387,394,095.50
6,362,475,548.00
6,363,685,548.00
6,364,595,336.00
6,364,664,086.00
6,364,988,542.00
6,357,836,402.50
6,360,180,304.50
6,363,249,183.50
6,393,291,531.00
6,400,310,779.50
76
Amount
Transactions
Grant of shares AGA 15 (December 2006)
Grant of performance shares (April 2006)
Grant of performance shares (September 2006)
Grant of shares AGA 15 (December 2006)
Grant of performance shares (December 2006)
Grant of shares AGA 15 (January 2007)
Payment of dividend in shares
Grant of performance shares (September 2007)
Grant of performance shares (October 2007)
na: not applicable.
* Weighted-average premium in euros.
Successive amounts of share capital
Date
Share
Nominal
value in
euros
Premium
per share
(in euros)
Number of
issued
shares
Total number
of shares
outstanding
In euros
31/07/07
31/08/07
30/09/07
31/10/07
30/11/07
31/12/07
31/12/07
14/04/08
31/01/08
29/02/08
31/03/08
16/04/08
31/05/08
30/06/08
24/07/08
24/07/08
31/07/08
31/08/08
22/09/08
30/09/08
31/10/08
30/11/08
10/12/08
15/12/08
15/12/08
31/12/08
26/01/09
31/01/09
31/03/09
24/04/09
30/04/09
04/06/09
30/07/09
30/07/09
18/09/09
30/09/09
26/10/09
31/10/09
31/12/09
31/01/10
28/02/10
31/03/10
19/04/10
28/04/10
31/07/10
29/07/10
30/09/10
31/10/10
30/11/10
31/12/10
31/12/10
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
* 10.73
* 8.90
* 8.90
* 8.98
* 12.30
* 10.88
na
na
11.02
8.90
13.06
9.90
13.94
11.54
15.58
18.215
* 13.36
* 8.90
na
* 13.36
* 8.90
* 8.90
* 8.90
na
na
* 10.02
na
* 8.90
* 8.60
na
* 8.90
* 11.50
* 9.106
* 10.109
na
* 8.90
na
* 8.90
* 9.96
8.90
8.90
8.90
na 7.91
7.89
8.281
9.16
9.68
10.18
8.84
na
313,145
2,900
73,452
139,501
170,200
351,093
60
423,516
36,806
6,800
11,100
62,500
34,580
61,600
4,361,052
132,541
19,900
5,000
3,295
23,166
53,650
2,000
6,850
184,245
1,067
24,550
8,595
4,500
70,450
444,028
41,270
53,184,521
4,721,216
141,063
2,869
27,833
3,933
1,800
9,975
2,000
200
42,000
429,078
14,000
8,963
7,141,109
418,729
60,235
39,703
321,010
590
1,164,006,014
1,164,008,914
1,164,082,366
1,164,221,867
1,164,392,067
1,164,743,160
1,164,743,220
1,165,166,736
1,165,203,542
1,165,210,342
1,165,221,442
1,165,283,942
1,165,318,522
1,165,380,122
1,169,741,174
1,169,873,715
1,169,893,615
1,169,898,615
1,169,901,910
1,169,925,076
1,169,978,726
1,169,980,726
1,169,987,576
1,170,171,821
1,170,172,888
1,170,197,438
1,170,206,033
1,170,210,533
1,170,280,983
1,170,725,011
1,170,766,281
1,223,950,802
1,228,672,018
1,228,813,081
1,228,815,950
1,228,843,783
1,228,847,716
1,228,849,516
1,228,859,491
1,228,861,491
1,228,861,691
1,228,903,691
1,229,288,569
1,229,346,769
1,229,355,732
1,236,496,841
1,236,915,570
1,236,975,805
1,237,015,508
1,237,336,518
1,237 337,108
6,402,033,077.00
6,402,049,027.00
6,402,453,013.00
6,403,220,268.50
6,404,156,368.50
6,406,087,380.00
6,406,087,710.00
6,408,417,048.00
6,408,619,481.00
6,408,656,881.00
6,408,717,931.00
6,409,061,681.00
6,409,251,871.00
6,409,590,671.00
6,433,576,457.00
6,434,305,432.50
6,434,414,882.50
6,434,442,382.50
6,434,460,505.00
6,434,587,918.00
6,434,882,993.00
6,434,893,993.00
6,434,931,668.00
6,435,945,015.50
6,435,950,884.00
6,436,085,909.00
6,436,133,181.50
6,436,157,931.50
6,436,545,406.50
6,438,987,560.50
6,439,214,545.50
6,731,729,411.00
6,757,696,099.00
6,758,471,945.50
6,758,487,725.00
6,758,640,806.50
6,758,662,438.00
6,758,672,338.00
6,758,727,200.50
6,758,738,200.50
6,758,739,300.50
6,758,970,300.50
6,761,087,129.50
6,761,407,229.50
6,761,456,526.00
6,800,732,625.50
6,803,035,635.00
6,803,366,927.50
6,803,585,294.00
6,805,350,849.00
6,805,354,094.00
77
As of December 31, 2010, the potential share capital was €7,084,471,163.00, divided into 1,288,085,666 shares, taking into account:
• 48,921,919 outstanding stock options, which could result in the issuance of 48,921,919 shares; and
• 1,826,639 performance shares granted in 2009 and 2010.
2.2.11. Market Information
2.2.11.1. Places of Listing – Stock Exchange Quotation
Source: Euronext Paris.
Stock exchange quotation for Vivendi ordinary shares – Euronext Paris
Compartment A (code FR0000127771) (in euros)
2009
January
February
March
April
May
June
July
August
September
October
November
December
2010
January
February
March
April
May
June
July
August
September
October
November
December
2011
January
February
2.2.11.2. Financial Securities Intermediary
BNP Paribas Securities Services
GCT – Service Emetteurs
Les Grands Moulins de Pantin
9, rue du Débarcadère
93761 Pantin Cedex – France
Average
quotation
High
Low
Number of
shares traded
Transactions
(in euros)
21.12
19.63
19.38
20.00
19.60
17.78
17.39
18.76
20.32
20.16
19.32
20.47
24.00
21.10
20.74
20.96
21.65
19.21
18.38
20.24
21.54
21.56
20.12
21.15
19.25
18.28
18.18
19.01
18.48
16.82
16.30
17.83
19.03
18.81
18.50
19.51
122,453,987
95,714,353
126,037,085
111,023,123
189,025,960
155,327,679
149,638,475
116,961,658
162,619,482
138,154,027
122,116,026
93,170,521
2,571,234,382
1,873,527,042
2,442,707,474
2,215,818,177
3,749,474,984
2,770,696,478
2,597,791,000
2,200,240,093
3,290,957,414
2,795,145,322
2,360,167,936
1,897,753,747
20.30
18.30
19.41
20.00
17.79
17.36
17.51
18.12
19.69
20.31
20.10
20.42
21.47
18.94
19.985
20.81
20.18
18.20
18.77
18.95
20.34
20.84
20.93
21.22
18.76
17.83
18.65
19.26
16.17
16.35
16.24
17.08
18.78
19.39
18.74
18.91
108,688,326
114,895,825
112,756,996
119,091,852
202,044,686
140,801,501
105,563,514
100,513,509
119,390,397
85,040,494
105,458,096
93,526,996
2,199,283,315
2,105,879,281
2,185,176,362
2,383,479,252
3,605,984,579
2,451,952,475
1,847,601,047
1,822,304,019
2,342,917,457
1,723,984,562
2,113,738,988
1,887,112,124
21.12
20.76
22.07
21.67
20.16
20.01
94,338,818
101,502,573
1,992,943,984
2,107,441,030
78
2.2.12. ADR (American Depositary Receipt) Program
On January 10, 2011, the level 1 sponsored ADR program, which had been maintained with Deutsche Bank since December 15, 2008, terminated.
Vivendi does not sponsor an American Depositary Receipt (ADR) program for its shares. Any currently existing ADR program is “unsponsored” and is not connected
in any way to Vivendi. Vivendi denies any responsibility regarding such a program.
2.3. Major Shareholders
2.3.1. Share Ownership and Voting Rights
As of December 31, 2010, the company’s share capital amounted to €6,805,354,094.00, divided into 1,237,337,108 shares.
The corresponding number of voting rights, considering that treasury shares have no voting rights, amounted to 1,237,257,544 as of December 31, 2010
and 1,235,498,544 as of February 28, 2011.
To the Management Board’s knowledge, as of December 31, 2010, the major shareholders holding shares in registered form or having sent a share ownership notice
to the company were as follows:
Owners
BlackRock, Inc.
Capital Research and Management
Amundi (Crédit Agricole AM/Société Générale AM)
Groupe Société Générale
CDC/ FSI (Caisse des Dépôts et Consignations)
Emirates International Investment Company LLC.
AllianceBernstein (Axa Investment Managers)
Vivendi Group savings plan
Natixis Asset Management
Bank of America/Merrill Lynch
BNP PARIBAS AM
DNCA Finance et Leonardo Asset Management
CNP Assurances
Crédit Suisse Securities (Europe) Limited
Prudential Plc
UBS Investment Bank
CM-CIC AM
Crédit Agricole Structured AM
Abu Dhabi Investment Authority
Rothschild – Asset Management
Axa Rosenberg (Axa Investment Managers)
Macquarie Group
FIPAR International (CDG Maroc) (a)
RCAR (Régime collectif d’allocation de retraite) (CDG Maroc) (a)
Hermes Equity (BT Pension Scheme Trustees Limited)
HBOS Plc
AQR Capital Management
Pension Reserve Fund (Fonds de réserve pour les retraités)
SRM Advisers (Monaco) S.A.M.
Groupama Asset Management
Federal Finance Gestion
TPG-Axon Capital
Veolia Group Savings Plan
Treasury shares
Other shareholders
Total
% of share capital
% of voting rights
Number of shares
Number of voting rights
5.02
4.64
4.05
4.01
3.77
2.81
2.50
2.01
1.95
1.51
1.24
1.00
1.00
0.99
0.89
0.85
0.84
0.54
0.51
0.51
0.50
0.49
0.49
0.49
0.49
0.47
0.46
0.44
0.41
0.39
0.37
0.35
0.23
0.01
53.79
100.00
5.02
4.64
4.05
4.01
3.77
2.81
2.50
2.01
1.95
1.51
1.24
1.00
1.00
0.99
0.89
0.85
0.84
0.54
0.51
0.51
0.50
0.49
0.50
0.49
0.49
0.49
0.46
0.44
0.41
0.39
0.37
0.35
0.23
0.00
53.76
100.00
62,035,490
57,398,503
50,050,447
49,556,305
46,636,819
34,711,040
30,890,180
24,821,769
24,118,458
18,697,470
15,372,179
12,384,516
12,358,565
12,258,330
11,051,279
10,556,493
10,357,443
6,705,111
6,331,792
6,270,887
6,137,874
6,098,229
6,120,337
6,050,159
6,105,125
5,787,313
5,701,349
5,489,679
5,043,275
4,879,254
4,563,556
4,316,348
2,858,600
79,564
665,381,279
1,237,337,108
62,035,490
57,398,503
50,050,447
49,556,305
46,636,819
34,711,040
30,890,180
24,821,769
24,118,458
18,697,470
15,372,179
12,384,516
12,358,565
12,258,330
11,051,279
10,556,493
10,357,443
6,705,111
6,331,792
6,270,887
6,137,874
6,098,229
6,120,337
6,050,159
6,105,125
5,787,313
5,701,349
5,489,679
5,043,275
4,879,254
4,563,556
4,316,348
2,858,600
0
665,381,279
1,237,257,544
(a) Total CDG Maroc, as of 06/16/2010: 12,170,496 shares, i.e., 0.99% of the share capital.
79
2.3.2. Pledge of Company Shares
As of December 31, 2010, pledges on shares of the company held in registered form by individual shareholders amounted to 330,241 shares, representing 0.02%
of the share capital of the company.
2.3.3. Control of the Company – Shareholders’ Agreements
To the company’s knowledge, as of December 31, 2010, no shareholder other than those listed in the table above held more than 5% of the company’s share capital
or voting rights, and there were no shareholders’ agreements, whether publicly disclosed or not, relating to Vivendi’s securities.
2.3.4. Notices made to the Company regarding Legal and Statutory Thresholds
In 2010, the company received several notices in respect of the crossing of statutory thresholds: Black Rock, Inc. (May, September and December), Amundi, (March, April,
May and June) and Groupe Société Générale (February). Black Rock, Inc. held 5.02% as of December 31, 2010 and 5.04% as of March 9, 2011. Amundi and Groupe Société
Générale hold, respectively, 4.05% and 4.01% of the share capital. The company also received notices in respect of the crossing, upwards or downwards, of statutory
thresholds (0.5% or any multiple of this percentage), including notices from Natixis Asset Management, UBS Investment Bank, Crédit Suisse Securities (Europe) Limited,
Société Générale Asset Management, BNP Paribas Asset Management, RCAR (Régime Collectif d’Allocation de Retraite (CDG Maroc)), Abu Dhabi Investment Authority,
Hermès Equity, CM-CIC AM, Federal Finance Gestion, CNP Assurances, DNCA Finance et Leonardo AM, Macquarie Group, Crédit Agricole AM, Crédit Agricole Structured
AM, CDC/FSI (Caisse des Dépôts et Consignations) and Alliance Berstein (AXA Investment Managers), details of which are contained in the table below.
2.3.5. Changes in Share Ownership and Voting Rights over the Last Three Years (as of December 31, 2010)
2010
BlackRock, Inc.
Capital Research and Management
Amundi
Groupe Société Générale
Natixis (Ixis Corporate & Investment Bank)
CDC/ FSI (Caisse des Dépôts et Consignations)
Emirates International Investment Company LLC.
AllianceBernstein (Axa Investment Managers)
Vivendi Group savings plan
Natixis Asset Management
Bank of America/Merrill Lynch
BNP Paribas
DNCA Finance et Leonardo Asset Management
CNP Assurances
Crédit Suisse Securities (Europe) Limited
Prudential Plc
UBS Investment Bank
CM-CIC AM
Crédit Agricole Structured AM
Abu Dhabi Investment Authority
Société Générale AM
Rothschild – Asset Management
Axa Rosenberg (Axa Investment Managers)
Macquarie Group
FIPAR International (CDG Maroc) (a)
RCAR (Régime collectif d’allocation de retraite) (CDG Maroc) (a)
Hermes Equity
(BT Pension Scheme Trustees Limited)
HBOS Plc
AQR Capital Management
Pension Reserve Fund (Fonds de réserve pour les retraités)
SRM Advisers (Monaco) S.A.M.
2009
2008
Number of
shares
% of
share
capital
% of
voting
rights
Number of
shares
% of
share
capital
% of
voting
rights
Number of
shares
% of
share
capital
% of
voting
rights
62,035,490
57,398,503
50,050,447
49,556,305
46,636,819
34,711,040
30,890,180
24,821,769
24,118,458
18,697,470
15,372,179
12,384,516
12,358,565
12,258,330
11,051,279
10,556,493
10,357,443
6,705,111
6,331,792
6,270,887
6,137,874
6,098,229
6,120,337
6,050,159
5.02
4.64
4.05
4.01
3.77
2.81
2.50
2.01
1.95
1.51
1.24
1.00
1.00
0.99
0.89
0.85
0.84
0.54
0.51
0.51
0.50
0.49
0.49
0.49
5.02
4.64
4.05
4.01
3.77
2.81
2.50
2.01
1.95
1.51
1.24
1.00
1.00
0.99
0.89
0.85
0.84
0.54
0.51
0.51
0.50
0.49
0.49
0.49
57,398,503
43,539,038
46,636,819
34,711,040
24,627,904
19,014,132
30,465,692
18,697,470
12,846,514
6,962,234
13,824,286
11,051,279
10,457,698
6,705,111
7,746,017
7,189,637
6,270,887
6,098,229
6,120,337
5,848,904
4.67
3.54
3.80
2.82
2.00
1.55
2.48
1.52
1.05
0.57
1.13
0.90
0.85
0.55
0.63
0.59
0.51
0.50
0.50
0.48
4.67
3.54
3.80
2.82
2.00
1.55
2.48
1.52
1.05
0.57
1.13
0.90
0.85
0.55
0.63
0.59
0.51
0.50
0.50
0.48
57,398,503
41,878,478
50,318,033
43,371,350
34,711,040
14,676,652
40,137,236
5,907,947
8,437,673
6,742,613
11,051,279
8,261,846
7,746,017
5,736,142
6,270,887
5,848,914
5,848,904
4.91
3.58
4.30
3.71
2.97
1.25
3.43
0.50
0.72
0.58
0.94
0.71
0.66
0.49
0.54
0.50
0.50
4.91
3.58
4.30
3.71
2.97
1.25
3.43
0.50
0.72
0.58
0.94
0.71
0.66
0.49
0.54
0.50
0.50
6,105,125
5,787,313
5,701,349
5,489,679
5 043,275
0.49
0.47
0.46
0.44
0.41
0.49
0.47
0.46
0.44
0.41
5,015,621
5,787,313
5,701,349
5,489,679
5,043,275
0.41
0.47
0.46
0.45
0.41
0.41
0.47
0.46
0.45
0.41
5,015,621
5,914,429
5,701,349
5,489,679
5,043,275
0.43
0.51
0.46
0.47
0.43
0.43
0.51
0.46
0.47
0.43
80
2010
Groupama Asset Management
Federal Finance Gestion
TPG Axon Capital
Veolia Environnement Group savings plan
Cross-Shareholding
Other shareholders
Total
2009
2008
Number of
shares
% of
share
capital
% of
voting
rights
Number of
shares
% of
share
capital
% of
voting
rights
Number of
shares
% of
share
capital
% of
voting
rights
4,879,254
4,563,556
4,316,348
2,858,600
79,564
665,381,279
1,237,337,108
0.39
0.37
0.35
0.23
0.01
53.79
100.00
0.39
4,879,254
0.37
0.35
4,316,348
0.23
2,746,000
0.01
79,564
53.76
813,589,357
100.00 1,228,859,491
0.40
0.35
0.22
0.01
66.18
100.00
0.40
6,194,697
0.35
4,316,348
0.22
2,795,000
0.00
79,564
66.19
775,303,962
100.00 1,170,197,438
0.53
0.37
0.24
0.01
66.23
100.00
0.53
0.37
0.24
0.00
66.24
100.00
(a) Total CDG Maroc: 12,170,496 shares, i.e., 0.99% of the share capital.
Appendix
The following tables present details of stock option plans (purchase and subscription plans) as well as performance share plans.
Stock purchase plans
Stock purchase plans granted in 2002 for a duration of eight years ended in 2010. As a result, 326,871 options were cancelled.
As of December 31, 2010, there were no stock purchase plans outstanding.
Stock Subscription plans
Date of the
Shareholders’
Meeting
21/09/00
21/09/00
29/04/03
29/04/03
29/04/03
29/04/03
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
Date of
the Board of
Directors’,
Supervisory
Board’s or
Management
Board’s
Meeting
25/09/02
29/01/03
28/05/03
09/12/03
06/05/04
09/03/05
28/02/06
21/03/06
22/09/06
12/12/06
06/03/07
27/02/07
17/09/07
25/10/07
26/02/08
28/02/08
28/02/08
16/12/08
26/02/09
24/02/09
23/10/09
25/02/10
24/02/10
28/04/10
21/09/10
15/11/10
Number of options granted
Total number
Grant date
of
beneficiaries
of options
10/10/02
29/01/03
28/05/03
09/12/03
21/05/04
26/04/05
13/04/06
13/04/06
22/09/06
12/12/06
23/04/07
23/04/07
17/09/07
25/10/07
16/04/08
16/04/08
16/04/08
16/12/08
16/04/09
16/04/09
23/10/09
15/04/10
15/04/10
04/06/10
21/09/10
15/11/10
13
34
414
29
425
472
11
495
33
3
6
570
7
4
646
7
7
1
6
707
12
5
775
11
1
2
2,451,000
1,610,000
10,547,000
310,000
8,267,200
7,284,600
2,008,000
3,473,520
58,400
24,000
1,304,000
4,414,220
42,400
63,200
4,839,200
732,000
732,000
12,000
1,240,000
5,321,120
40,000
1,148,000
4,149,200
40,000
5,000
6,000
Adjusted number of options
Of which, number
granted to members of
governing bodies
Number of
benefiNumber
ciaries of options
6
8
9
0
8
11
10
0
0
0
6
5
0
0
3
7
7
6
4
0
5
4
- - - 1,800,000
1,175,000
3,000,000
0
2,320,000
2,595,000
1,880,000
0
0
0
1,304,000
528,000
0
0
304,000
732,000
732,000
1,240,000
368,000
0
1,148,000
368,000
Vesting
date for
options
11/10/04
30/01/05
29/05/05
10/12/05
22/05/06
27/04/07
14/04/08
14/04/08
23/09/08
13/12/08
24/04/10
24/04/10
18/09/10
26/10/10
17/04/11
17/04/11
17/04/11
17/12/11
17/04/12
17/04/12
24/10/12
16/04/13
16/04/13
05/06/13
22/09/13
16/11/13
Expiration
date
Adjusted
exercise
price in
euros
Exercised
in 2010
10/10/10
29/01/11
28/05/13
09/12/13
21/05/14
26/04/15
13/04/16
13/04/16
22/09/16
12/12/16
23/04/17
23/04/17
17/09/17
25/10/17
16/04/18
16/04/18
16/04/18
16/12/18
16/04/19
16/04/19
23/10/19
15/04/20
15/04/20
04/06/20
21/09/20
15/11/20
11.25
14.78
13.39
17.73
19.22
21.98
26.54
26.54
26.54
27.35
28.63
28.63
28.63
28.63
23.37
23.37
23.37
23.37
18.62
18.62
19.25
18.33
18.33
19.71
18.95
20.40
Total
22,134
610,745
227,429
26,890
12,652
- - - - - - - - - - - - - - 4,301
- - 2,689
- - - 906,840
Cancelled
in 2010
Outstanding
as of
December
31, 2010
- 0
- 89,021
- 3,758,428
- 98,595
14,341
7,711,622
- 7,168,839
- 2,159,325
- 3,332,497
- 49,622
- 17,206
- 1,402,383
38,800
4,187,076
- 36,998
- 50,762
102,656
4,731,148
- 787,129
- 787,129
12,904
0
- 1,333,238
151,431
5,472,994
- 43,019
- 1,234,431
39,641
4,419,457
- 40,000
- 5,000
- 6,000
359,773 48,921,919
81
Performance share plans
Adjusted number of rights to performance shares
Number of rights to performance shares
Date of the
Shareholders’
Meeting
28/04/05
28/04/05
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
24/04/08
Date of the
Supervisory
Board’s
or the
Management
Board’s
Meeting
26/02/08
28/02/08
16/12/08
26/02/09
24/02/09
23/10/09
25/02/10
24/02/10
28/04/10
21/09/10
15/11/10
Total number
Of which, number
granted to members of
governing bodies
Grant
date
of
beneficiaries
of
performance shares
Number
of
beneficiaries
Number of
rights to
performance
shares
Acquisition
date (a)
Date of
disposal
Number of
rights
cancelled in
2010
16/04/08
16/04/08
16/12/08
16/04/09
16/04/09
23/10/09
15/04/10
15/04/10
04/06/10
21/09/10
15/11/10
646
7
1
6
707
12
5
775
11
1
2
403,493
122,003
1,000
123,336
443,665
3,336
95,668
988,504
13,334
1,667
2,000
3
7
6
4
0
5
4
- - - 25,335
122,003
- 123,336
30,669
0
95,668
30,669
- 19/04/10
19/04/10
17/12/10
18/04/11
18/04/11
24/10/11
16/04/12
16/04/12
05/06/12
24/09/12
16/11/12
19/04/12
19/04/12
17/12/12
19/04/13
19/04/13
25/10/13
17/04/14
17/04/14
06/06/14
25/09/14
17/11/14
Total
3,140
- 1,076
- 12,537
- - 13,223
- - - 29,976
Number of
issued shares
at the end
of the
acquisition
period
Number of
rights
outstanding
as of
December 31,
2010
316,409
112,669
- 360
897
- 430,335
(b) 55,224
(c) 9,334
0
132,662
(d) 456,904
3,595
102,859
(e) 1,049,060
13,334
1,667
2,000
1,826,639
(a) First day of quotation at the end of a 2-year acquisition period.
(b) Includes 55,224 rights to performance shares granted to US beneficiaries to be registered in an account in 2012.
(c) Includes 9,334 rights to performance shares granted to US beneficiaries to be registered in an account in 2012.
(d) Includes 68,476 rights to performance shares granted to US beneficiaries to be registered in an account in 2013.
(e) Includes 141,328 rights to performance shares granted to US beneficiaries to be registered in an account in 2014.
SAR plans (including ex-ADS plans)
Adjusted number of SAR
Number of SAR granted
Date of
the Board of
Directors,
Supervisory
Board or
Management
Date of the
Board
Shareholders’
Meeting
Meeting
21/09/00
21/09/00
21/09/00
21/09/00
21/09/00
29/04/03
29/04/03
29/04/03
29/04/03
28/04/05
28/04/05
28/04/05
28/04/05
28/04/05
24/01/02
05/03/02
24/04/02
29/05/02
25/09/02
28/05/03
09/12/03
06/05/04
09/03/05
28/02/06
21/03/06
22/09/06
06/03/07
27/02/07
Total number
Of which, number
granted to members
of governing bodies
Grant date
of
beneficiaries
of SAR
Number
of
beneficiaries
24/01/02
20/03/02
24/04/02
29/05/02
10/10/02
28/05/03
09/12/03
21/05/04
26/04/05
13/04/06
13/04/06
22/09/06
23/04/07
23/04/07
4
1
2
1
38
75
51
138
184
2
154
1
1
177
1,200,000
200,000
200,000
20,000
1,168,300
752,000
705,000
1,012,400
1,786,400
192,000
1,058,320
24,000
112,000
1,168,660
1
- - - 1
1
0
0
1
1
0
0
1
0
Number
of SAR
Vesting date
for SAR
150,000
100,000
180,000
0
0
125,000
112,000
0
0
112,000
0
25/01/03
21/03/04
25/04/04
30/05/04
11/10/04
29/05/05
10/12/05
22/05/06
27/04/07
14/04/08
14/04/08
23/09/08
24/04/10
24/04/10
Expirati
on date
Adjusted
exercise
price
(in US
dollars)
24/01/10
20/03/10
24/04/10
29/05/10
10/10/10
28/05/13
09/12/13
21/05/14
26.04.15
13/04/16
13/04/16
22/09/16
23/04/17
23/04/17
(a) 45.64
(a) 37.98
(a) 33.26
(b) 29.41
(b) 10.96
(b) 15.29
(b) 21.01
(b) 22.89
(b) 28.49
(b) 32.16
(b) 32.16
(b) 32.16
(b) 38.45
(b) 38.45
Total
(a) Adjustment following the payment of the dividend for fiscal year 2010 by withdrawal from the reserves.
(b) Adjustment following the payment of the dividend for fiscal year 2009 by withdrawal from the reserves.
Exercised
in 2010
Rights
cancelled or
withdrawn
in 2010
Outstanding
as of
December
31,
2010
- - - - 155,785
24,187
- - - - - - - - 179,972
1,238,389
206,424
51,609
21,503
5,737
- - - - - 2,581
- - 4,271
1,530,514
0
0
0
0
0
178,039
254,119
614,536
1,409,623
206,448
971,310
25,806
120,419
1,158,196
4,938,496
82
SAR plans (ex-ADS Seagram and ex-ADS MP3)
The SAR plans (ex-ADS Seagram and ex-MP3) ended in 2010. As a result, 5.62 million SARs were cancelled.
As of December 31, 2010, there were no outstanding SAR plans (ex-Seagram and ex-MP3).
SAR plans (ex-ADS USA Networks)
Adjusted number of SAR
Plan opening date and
date of the Board of
Directors’ Meeting
Total
number of
beneficiaries
Vesting date
for SAR
Expiration date
62
175
1
1
1
165
170
18/12/01
18/12/01
16/07/02
24/09/02
25/01/03
25/04/02
25/04/02
18/12/10
18/12/10
16/07/11
24/09/11
25/01/12
25/04/11
25/04/11
18/12/00
18/12/00
16/07/01
24/09/01
25/01/02
25/04/01
25/04/01
Adjusted
exercise price
(in US dollars)
12.83
17.69
17.72
17.57
25.17
15.53
21.42
Total
exercised in 2010
rights cancelled
or withdrawn in
2010
outstanding
as of 12/31/2010
1,090
11,311
3,500
4,311
12,343
32,555
5,084
21,411
1,860
2,669
31,024
0
0
6,174
15,795
122,790
11,801
6,624
163,184
Section 3 Corporate Governance
3.1. Directors, Senior Management and Supervisory Bodies
3.1.1. Supervisory Board
3.1.1.1. General Provisions
The Supervisory Board is comprised of a maximum of eighteen members (twelve members as of the date of publication of this report). Each member of the
Supervisory Board serves for a four-year term (Article 7 of Vivendi’s by-laws).
Each member of the Supervisory Board must hold at least one thousand company shares during his/her term of office (Article 7-2 of Vivendi’s by-laws). In addition,
at its meeting held on February 28, 2008, the Supervisory Board resolved that each of the members must own a number of Vivendi shares equivalent to one year’s
paid directors’ fees.
At the end of each annual Shareholders’ Meeting which approves the financial statements for the previous fiscal year, the number of members of the Supervisory
Board over the age of 70, as of the closing date of the previous fiscal year, must not exceed one-third of the acting members currently in office. In the event that
this limit is exceeded, the oldest members are deemed to have resigned at the end of the Shareholders’ Meeting (Article 7-3 of Vivendi’s by-laws).
The Supervisory Board is comprised of a majority of independent members (ten members as of the date of publication of this report). A member is deemed
independent when he/she has no direct or indirect relationship of any kind, other than a non-substantial shareholding in the company, with the company, its
group or its management which could interfere with the exercise of his/her independent judgment (as defined in the AFEP/MEDEF code for publicly traded
companies to which the Company adheres).
The independent director classification and the criteria used to make such determination are reviewed by the Corporate Governance and Nominating Committee
when it considers and discusses the appointment of candidates to the Supervisory Board. The Corporate Governance and Nominating Committee reviews, as
necessary, any change in the situation of a member of the Board during his/her term of office.
Each member of the Supervisory Board undertakes to regularly attend Supervisory Board meetings and annual Shareholders’ Meetings. Members of the Supervisory
Board may attend meetings via videoconferencing or other forms of telecommunication (Article 10 of Vivendi’s by-laws).
83
Vivendi Corporate Governance
3.1.1.2. Composition of the Supervisory Board
On the date of publication of this report, the Supervisory Board has twelve members, ten of whom are independent directors. Three members are non-French
nationals, two are citizens of European Union member states other than France and the other is an American citizen.
Detailed information about the members of the Supervisory Board is provided below in the “Main Activities of Current Members of the Supervisory Board” section.
In 2010, the Supervisory Board met eight times. The attendance rate at Supervisory Board meetings was 95%.
List of current Supervisory Board Members, including date of appointment and number of shares held
Full Name
Jean-René Fourtou
Henri Lachmann (1)
Claude Bébéar
Daniel Camus
Jean-Yves Charlier (1)
Maureen Chiquet
Philippe Donnet
Dominique Hériard Dubreuil
Aliza Jabès
Christophe de Margerie
Pierre Rodocanachi (1)
Jacqueline Tammenons Bakker
Position
Chairman of the
Supervisory Board
Vice-Chairman and Member
of the Supervisory Board
(a) Member of the
Supervisory Board
(a) Member of the
Supervisory Board
(a,b) Member of the
Supervisory Board
(a, b) Member of the
Supervisory Board
(a) Member of the
Supervisory Board
(a) Member of the
Supervisory Board
(a) Member of the
Supervisory Board
(a) Member of the
Supervisory Board
(a) Member of the
Supervisory Board
(a, b) Member of the
Supervisory Board
Age
Date of initial
appointment and
latest renewal to the
Supervisory Board
Committee
Member
End of term
Number
of shares held
D
AG 2012
713,799*
B, C and D
AG 2012
7,577
A and D
AG 2012
5,879
75
28/04/05
24/04/08
28/04/05
24/04/08
28/04/05
24/04/08
58
29/04/10
B
AG 2014
4,500
47
24/04/08
A and B
AG 2012
5,308
48
30/04/09
C
AG 2013
5,200
50
24/04/08
A
AG 2012
5,000
64
29/04/10
D
AG 2014
2,300
48
29/04/10
A and B
AG 2014
5,000
59
D
AG 2013
4,000
72
30/04/09
28/04/05
24/04/08
B and C
AG 2012
12,218
57
29/04/10
A and C
AG 2014
5,350
71
72
* Includes 143,872 shares held in beneficial ownership.
(1) In advance of his renewal term, as proposed at the Shareholders’ Meeting to be held on April 21, 2011.
(a) Independent member.
(b) Non-French citizen.
A : Strategy Committee.
B : Audit Committee.
C : Human Resources Committee.
D : Corporate Governance and Nominating Committee.
84
Main activities of current members of the Supervisory Board
Jean-René Fourtou, Chairman of the Supervisory Board
French citizen.
Business address
Vivendi – 42, avenue de Friedland, 75008 Paris – France.
Expertise and experience
Mr. Jean-René Fourtou was born in Libourne on June 20, 1939 and is a graduate of the École Polytechnique. In 1963, he joined Bossard & Michel as a consultant.
In 1972, he became Chief Operating Officer of Bossard Consultants and Chairman and Chief Executive Officer of the Bossard Group in 1977. Then, in 1986, he was
appointed Chairman and Chief Executive Officer of the Rhône-Poulenc Group. From December 1999 to May 2002, he served as Vice Chairman and Chief Operating
Officer of Aventis. He is the Chairman of the Bordeaux University Foundation. From 2002 to 2005, he was Chairman-Chief Executive Officer of Vivendi before
becoming the Chairman of the Supervisory Board in April 2005.
Positions currently held
Vivendi Group
Groupe Canal+, Chairman of the Supervisory Board
Maroc Telecom (Morocco), Member of the Supervisory Board
Other positions and functions
Sanofi Aventis, Director
Nestlé (Switzerland), Director
Axa Millésimes, Member of the Supervisory Board
Chairman of the Bordeaux University Foundation
Positions previously held that expired during the last five years
Axa, Vice-Chairman of the Supervisory Board
Axa, Member of the Ethics and Governance Committee
Finaxa, Permanent Representative of AXA Assurances IARD Mutuelle
Cap Gemini, Director
NBC Universal (United States), Director
ICC, International Chamber of Commerce, Honorary Chairman
Henri Lachmann, Vice Chairman and Member of the Supervisory Board
French citizen.
Business address
Schneider Electric – 35 rue Joseph Monier, 92500 Rueil-Malmaison – France.
Mr. Henri Lachmann was born on September 13, 1938 and is a graduate of the Ecole des Hautes Etudes Commerciales (HEC) and holds an accounting degree. In 1963, he joined
Arthur Andersen, the international accounting management and auditing firm, where he successively held the positions of auditor, then manager of the Auditing Department.
In 1970, he joined the Strafor Facom Group, where he held various general management positions until June 1981, when he was appointed Chairman of the group.
Mr. Henri Lachmann has held the position of Director of Schneider Electric since 1996 and, in 1999, became Chairman and Chief Executive Officer of the group. Since 2006, he
has been the Chairman of the Schneider Electric Supervisory Board.
Schneider Electric SA, Chairman of the Supervisory Board
Carmat, Director
Norbert Dentressangle Group, Member of the Supervisory Board
Axa IARD Mutuelles, Director
Marie Lannelongue Surgical Center, Chairman of the Board of Directors
Fimalac, Censor (non-voting Director)
Tajan, Censor (non-voting Director)
Foundation for Continental Law, Chairman
Conseil des Prélèvements Obligatoires, Member
Orientation Committee of the Institut de l’Entreprise, Member
ANSA, Director
85
Schneider Electric SA, Chairman and Chief Executive Officer
Finaxa, Director
CNRS, Director
Fimalac Investissements, Director
Axa Courtage Assurance Mutuelle, Director
Axa Assurances Vie Mutuelle, Director
Axa ONA (Morocco), Director
Axa, Member of the Supervisory Board
Claude Bébéar, Member of the Supervisory Board
French citizen.
Business address
Axa – 25, avenue Matignon, 75008 Paris – France.
Mr. Claude Bébéar was born on July 29, 1935 and is a graduate of the École Polytechnique. He has spent his entire career in the insurance sector beginning in 1958.
From 1975 to 2000, as Chairman and Chief Executive Officer, he headed a group of insurance companies which became Axa in 1984. He served as Chairman of the
Supervisory Board until 2008 and is currently the Honorary Chairman of the Axa Group. Mr. Bébéar established and chairs the Institut du mécénat de solidarité, a
humanitarian and social welfare organization, as well as the Institut Montaigne, an independent political think-tank.
Axa Group
Axa Assurances IARD Mutuelle, Director
Axa Assurances Vie Mutuelle, Director
BNP Paribas, Director
Schneider Electric SA, Censor (non-voting Director)
Institut du mécénat de solidarité, Chairman
Institut Montaigne, Chairman
Axa, Chairman of the Supervisory Board
Finaxa, Chairman and Chief Executive Officer
Axa Group, Director of various Axa companies
Schneider Electric SA, Director
Axa Courtage Assurance Mutuelle, Director
Daniel Camus, Member of the Supervisory Board
French citizen.
Business address
151 boulevard Haussmann –- 75008 Paris.
Mr. Daniel Camus was born on April 14, 1952, and he graduated from the Institut d’Etudes Politiques in Paris with a Doctorate in Economics and Management
Sciences. He spent most of his career in the chemical and pharmaceutical industry, primarily outside of France. During his more than 25 years with the Hoechst and
the Aventis groups, he spent the major part of his career in North America before returning to Europe, where held the position of Group Chief Financial Officer for over
15 years, first as a member of the Management Board of the Roussel Uclaf SA group in Paris, then successively as group Chief Financial Officer of Hoechst Marion
Roussel in Bridgewater (USA) and Frankfurt/Main (Germany) and as Chief Financial Officer and member of the Management Board of Aventis Pharma AG, following
the merger of Hoechst and Rhône Poulenc. In 2002, he joined the EDF Group where, as Chief Financial Officer, he directed the financial transformation that led to the
admission of new shareholders to the company in 2005. Until late 2010, he was Executive Director of the EDF Group in charge of strategy and international activities.
Valeo S.A., Director
86
Morphosy AG (Germany), Member of the Supervisory Board
SGL Carbon AG (Germany), Member of the Supervisory Board
EDF International S.A., Chairman of the Board of Directors
EDF Energy UK Ltd (United Kingdom), Director
EnBW AG (Germany), Member of the Supervisory Board
Dalkia SAS, Member of the Supervisory Board
Jean-Yves Charlier, Member of the Supervisory Board
Belgian Citizen.
Business address
Promethean – Lower Philips Road, Blackburn, Lancashire BB1 5TH – United Kingdom.
Mr. Jean-Yves Charlier, born on November 29, 1963 in Belgium, holds a Masters of Business Administration (MBA) in strategy and marketing from Wharton Business
School. In 1987, Mr. Charlier joined the Wang group in France where he served in several different sales and marketing management positions. From 1993 to 1995, he was
responsible for the integration services division in Europe based in London, before becoming Vice-President of Wang International in 1995. In 1996, he was appointed
President of the Equant group, first for the integration services division, and then for all worldwide group marketing, sales and services operations. In 2002,
Jean-Yves Charlier joined the BT group, with responsibility for Europe and operations within the Global Services division. In 2004, he joined the Fidelity International group
as Vice President and was appointed Chairman and CEO of Colt Telecom Group with responsibility for restructuring the European telecommunications operator. Since 2007,
Jean-Yves Charlier has served as Chief Executive Officer of Promethean, a company that specializes in interactive educational products and media for teachers.
Promethean (United Kingdom), Chief Executive Officer
Colt Telecom Group (Luxembourg), Chairman-Chief Executive Officer
Maureen Chiquet, Member of the Supervisory Board
US citizen.
Business address
Chanel, Inc. – 9 West 57th Street, 44th floor, New York, NY 10019 – USA.
Mrs. Maureen Chiquet, born on March 9, 1963 in Saint Louis (United States), graduated summa cum laude from Yale University with a Bachelor of Arts (B.A.)
in comparative literature. Mrs. Chiquet began her career at L’Oreal Paris in 1985 as a Product Manager. In 1988, she moved to San Francisco to join Gap as an
Assistant Merchandiser in the Accessories Division. She spent six years there, working in various merchandising positions. In 1994, she moved to Old Navy as a
Divisional Merchandise Manager. After eight years she became Executive Vice President of Merchandising, Planning and Production, growing the brand from 35 to
850 stores. In 2002, she was named President of Banana Republic where she was responsible for overseeing the entire organization, including all stores and
operations in the US and Canada. Maureen Chiquet joined Chanel in 2003 and in October 2004 was named President of Chanel, Inc. in the United States. During those
two years as President and Chief Operating Officer of Chanel, Inc., Mrs. Chiquet directed all US operations for Fragance & Beauté, Fashion, Watches and Fine Jewelry.
She has worked to ensure the consistency of the global brand and reinforce its luxury positioning and timeless modernity within the US. Maureen Chiquet has acted
as Chairwoman and CEO of Chanel since January 2007.
Chanel, Chairwoman and Chief Executive Officer
Peek aren’t you curious (children’s apparel), Director
87
Philippe Donnet, Member of the Supervisory Board
French citizen.
Business address
164 Mount Pleasant Road, 298355 Singapore.
Mr. Philippe Donnet, born on July 26, 1960 in France, is a graduate of the École Polytechnique and a certified member of the Institut des actuaires français (IFA).
In 1985, he joined Axa in France. From 1997 to 1999, he served as Deputy Managing Director of Axa Conseil (France), before becoming Deputy Director of Axa
Assicurazioni in Italy in 1999, and then joined the Axa Executive Committee as Senior Vice President for the Mediterranean region, Latin America and Canada in 2001.
In March 2002, he was also appointed as Chairman-CEO of Axa Re and President of Axa Corporate Solutions. In March 2003, Philippe Donnet was appointed Chief
Executive Officer of Axa Japan where he successfully led a recovery by implementing new management and launching innovative and very profitable products.
In October 2006, Philippe Donnet was appointed Chairman of Axa Japan and Chief Executive for the Asia-Pacific region. In April 2007, he joined the Wendel Group,
where he formed investment operations in the Asia Pacific region. He currently acts as a consultant for French businesses that want to grow in Asia.
Gecina, Director
La Financière Miro (Albingia), Member of the Supervisory Board
Pastel et Associés, Director
Wendel, Chief Executive Officer for Asia-Pacific
Axa Japan Holding, Chairman and Chief Executive Officer
Axa Insurance Life, Chairman and Chief Executive Officer
Axa Direct Japan, Chairman
Axa Asia Pacific Holding, Director
Winvest Conseil (Luxembourg SARL), Manager
Winvest International SA SICAR (Luxembourg company), Director
Dominique Hériard Dubreuil, Member of the Supervisory Board
French citizen.
Business address
Rémy Cointreau – 21 boulevard Haussmann, 75008 Paris – France.
Mrs. Dominique Hériard Dubreuil, born on July 6, 1946, was involved in international public relations between 1970 and 1988, successively with Havas Conseil, Ogilvy
& Mather, Hill & Knowlton and McCann-Erickson, before creating her own agency, Infoplan, in 1978. In 1990, she became Chairwoman and Chief Executive Officer of
Rémy Martin, and then in 1998 Chairwoman and Chief Executive Officer of Rémy Cointreau, of which she is currently the Chairwoman of the Board of Directors.
Rémy Cointreau SA, Chairwoman of the Board of Directors
Wendel, Member of the Supervisory Board
Remy Cointreau United States Inc., Chairman
Orpar SA, Director
Andromède SAS, Director and Chief Executive Officer
Baccarat, Director
Vinexpo Overseas SAS, Chairwoman of the Supervisory Board
Vinexpo SAS, Member of the Supervisory Board
Medef, Member of the Executive Committee
INRA, Director
AFEP, Director
Fondation 2e Chance, Director
Fondation de France, Director
Comité France Chine, Director
88
Rémy Cointreau Services SAS, Chairwoman
Stora Enso OYJ, Director
Botapol Holding BV, Director
CEDC, Director
Rémy Finance BV, Director
Aliza Jabès, Member of the Supervisory Board
French citizen.
Business address
Laboratoire Nuxe – 19 rue Péclet, 75015 Paris – France.
Mrs. Aliza Jabès, born on July 20, 1962, is a graduate of the Paris Institut d’Études Politiques and holds an MBA from New York University. Between 1986 and 1988,
she was a financial analyst for the Eli Lilly laboratory in Indianapolis. In 1989, she decided to go into business and took over the Nuxe laboratory, a small traditional
laboratory set up by a Parisian chemist 30 years earlier. Under her influence, the Nuxe brand very quickly became a major player in the cosmetics market. The brand
is now sold in pharmacies and its products are distributed in 50 countries.
Laboratoire Nuxe, Chairwoman
Federation of Beauty Companies (FEBEA), Director
French National Institute of Industrial Property (INPI), Director
Christophe de Margerie, Member of the Supervisory Board
French citizen.
Business address
Total S.A. – 2 place Jean Millier, 92078 Paris La Défense cedex – France.
Born on August 6, 1951, Mr. Christophe de Margerie is a graduate of the Ecole Supérieure de Commerce in Paris. He joined the financial department of Total in 1974,
and was initially responsible for budgeting and then the financing of the company’s exploration and production subsidiaries. In 1987, he became Group Treasurer. In
May 1990, he moved to Total Trading and the Middle East, where he was successively CFO, Vice-President for the Middle East, President for the Middle East and
Senior Executive Vice-President in March 1992, at which time he also joined the Group’s Management Committee. In June 1995, he was appointed President of Total
Middle East and in May 1999, President of Exploration & Production of TotalFina. In March 2000, following the merger with Elf, he was appointed Senior Executive
Vice-President and in January 2002, President of Exploration and Production of TotalFinaElf which became Total S.A. on May 6, 2003. He has been a member of
Total’s Executive Committee since May 1999 and a Director of Total since May 2006. In February 2007, Christophe de Margerie was appointed Chief Executive
Officer of Total and Chairman of the Executive Committee. Since May 21, 2010, he has served as Chairman and Chief Executive Officer of Total.
Groupe Total S.A.
Chairman and Chief Executive Officer
Total E&P (Indonesia), Chairman
Shtokman Development AG (Switzerland), Director
CDM Patrimonial SARL, Manager
Institut du Monde Arabe, Director
89
Total E&P (Russia), Director
Total E&P (Azerbaïdjan), Director
Total E&P (Kazakhstan), Director
Total Profils Pétroliers, Director
Abu Dhabi Petroleum Company Ltd, Director
Abu Dhabi Marine Areas Ltd, Director
Iraq Petroleum Company Ltd, Director
Total E&P Norge A.S., Director
Total Upstream UK Ltd, Director
Innovarex, Director
Total E&P Myanmar, Director
Total Abu al Bukhoosh, Permanent Representative of Total S.A. to the Board of Directors
Taittinger, Member of the Supervisory Board
Elf Aquitaine, Chairman and Chief Executive Officer
Pierre Rodocanachi, Member of the Supervisory Board
French citizen.
Business address
MP Conseil – 40, rue La Pérouse, 75116 Paris – France.
Mr. Pierre Rodocanachi, born on October 2, 1938, holds a graduate degree in physics from the Faculté des Sciences of the University of Paris. He began his career
as a researcher in a solid physics laboratory at the CNRS, then managed the planning department at the Bureau for Scientific and Technical Research for five years.
Between 1969 and 1971, he served as Technical Consultant on Scientific Matters for the French Minister of Industry and then he was the Deputy Director of the
National Agency for Research Valuation (ANVAR). During this entire period, he was also a Director of the CNRS. Pierre Rodocanachi currently chairs the Advisory
Board of Booz & Co., an international strategy and management consulting firm in Paris, which he joined in 1973. He was chief executive officer of its French
subsidiary and, in 1987, was appointed as a Director of Booz & Co., as a member of its Strategic Committee and the Operations Committee, and as Senior Vice
President responsible for Southern Europe for all group activities. Pierre Rodocanachi is simultaneously a Director of several non-profit organizations, including the
US Chamber of Commerce in France, where he was Chairman from 1997 to 2000, the Institut du Mécénat de Solidarité, where he was founder and treasurer, and the
French review for corporate governance. In 2003, Pierre Rodocanachi founded the financial consulting firm Management Patrimonial Conseil, which provides
consulting services to approximately 12 family industrial groups. Pierre Rodocanachi is a member of the French Association of Olympic Medal Holders.
Management Patrimonial Conseil, Chief Operating Officer
ProLogis European Properties, Director and member of the Audit Committee
ENABLON, Director
DMC (Dollfus Mieg & Cie), Director and Chairman of the Executive Compensation Commission
Carrefour, Director and Chairman of the Audit Committee
OBC (Odier Bungener Courvoisier) Bank, Director and Chairman of the Audit Committee
“Commentaire” (a journal of political economics), Director
LPCR, Chairman of the Supervisory Board
Jacqueline Tammenoms Bakker
Dutch citizen.
Business address
Duinweg 85, 2585 The Hague – Netherlands.
Mrs. Jacqueline Tammenoms Bakker, born on December 17, 1953, holds a BA degree in History and in French from Oxford University and a MA degree in International
Relations from the Johns Hopkins School for Advanced International Studies in Washington D.C. She joined Shell International in 1977 and held a variety of positions
in the Netherlands, the U.K. and Turkey. In 1989, she joined McKinsey & Co where she worked as a consultant. From 1995 to 1998, she was Vice-President Foods
(Europe) for Quest International (a Unilever subsidiary). In 1999, Jacqueline Tammenoms Bakker moved to the public sector. From 1999 to 2001, she was director of
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Gigaport, an initiative to accelerate the introduction of broadband Internet in the Netherlands, and then from 2001 to 2007, she was a Director General at the Ministry
of Transport in the Netherlands, responsible for Civil Aviation and Freight Transport. From 2006 to 2007, she was Chairwoman of the High Level Group for the future of
aviation regulation in Europe, reporting to the EU Commissioner for Transport. She is currently an advisor to several Ministries in The Hague.
Tesco PLC (UK), Member of the Supervisory Board
Land Registry Ordinance Survey (the Netherlands), Member of the Supervisory Board
Van Leer Group Foundation (the Netherlands), Member of the Supervisory Board
Rotterdam School of Management, Member of the Advisory Board
National Council for Environment and Infrastructure (the Netherlands), Chairwoman
Members of the Supervisory Board whose term of office is proposed for renewal at the Shareholders’ Meeting to be held on April 21, 2011
To facilitate a smoother renewal for the Supervisory Board, the early renewal for a four-year term of Messrs. Henri Lachmann, Jean-Yves Charlier and
Pierre Rodocanachi will be proposed to the Combined Shareholders’ Meeting to be held on April 21, 2011.
3.1.1.3. Stock trading ethics
Pursuant to the AFEP and MEDEF joint recommendations published in the corporate governance code of publicly traded companies, hedging transactions by means
of short selling or using derivative financial instruments or optional contracts of any nature is prohibited for all principals and employees.
Throughout the periods defined below as well as those communicated to the members of the Supervisory Board by the General Counsel of the company (“blackout
periods”), direct or indirect sale and purchase transactions in the company’s securities by members of the Supervisory Board whether on the open market or in
off-market block trading are forbidden during the period:
• from the date on which members of the Supervisory Board become aware of specific market information regarding the company’s day-to-day business or
prospects which, if made public, would be likely to have a material impact on the company’s share price, up to the date on which this information is made
public; and
• of 30 calendar days preceding and including the day of publication of the company’s quarterly, half-yearly and annual consolidated financial statements.
The Chairman of the Corporate Governance and Nominating Committee shall be informed as soon as possible by members of the Supervisory Board of any material
purchase, subscription, sale or swap transaction relating to securities issued by the company which, while not falling within the scope of the above paragraph, are
entered into by any relative of, or entities connected with such a member or his/her relatives, and where such transaction has been recommended by such member
or such member has been informed of its existence. The company’s General Counsel shall also inform the Chairman of the Corporate Governance and Nominating
Committee of any transactions that are declared pursuant to the above paragraph.
3.1.1.4. Family Relationships
To the Company’s knowledge, there exist no family ties between the members of the Supervisory Board or between any of them and any member of the Management Board.
3.1.1.5. Absence of Conflicts of Interest
To the company’s knowledge, there are no actual or potential conflicts of interest between Vivendi and any member of the Supervisory Board with regard to their
personal interests or other responsibilities.
3.1.1.6. Absence of any Sentence for Fraud, Liability Associated with a Business Failure or Public Incrimination and/or Sanction
To the company’s knowledge, over the last five years:
• no member of the Supervisory Board has been convicted of any fraud-related matter;
• no member of the Supervisory Board has been associated with a bankruptcy, receivership or liquidation while serving on an administrative,
management or supervisory body;
• no official public incrimination and/or sanction has been delivered against any member of the Supervisory Board; and
• no member of the Supervisory Board has been prevented by a court from acting as a member of an administrative, management or supervisory body
or from participating in the management of a public issuer.
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3.1.1.7. Agreements between the Company and Members of the Supervisory Board – Service Contracts
There is no service agreement or contract between any member of the Supervisory Board and the company or one of its subsidiaries which grants benefits under the
terms of such contract.
3.1.1.8. Loans and Guarantees Granted to Members of the Supervisory Board
The company has not granted any loans or issued any guarantees to any member of the Supervisory Board.
3.1.1.9. Internal Regulations and Jurisdiction of the Supervisory Board
Role and powers of the Supervisory Board under applicable law and the company’s by-laws
As required by law, the Supervisory Board continuously monitors the management of the company by the Management Board. It may proceed with any verification
or control it deems appropriate and is provided with all documents it deems useful in connection with the fulfillment of its purpose and functions.
Internal Regulations
The Internal Regulations of the Supervisory Board is an internal document intended to supplement the company’s by-laws by setting forth the Supervisory Board’s
operational procedures and the rights and duties of its members.
Role and Powers of the Supervisory Board under the Internal Regulations
The following transactions require the approval of the Supervisory Board prior to their implementation:
• disposals of real estate properties and sale of all or part of investments in companies, whenever any individual transaction exceeds €300 million;
• issues of securities which, directly or indirectly, give right to the share capital of the company and issues of convertible bonds in excess of €100 million;
• issues of non-convertible bonds in excess of €500 million, except for transactions for the purpose of renewing debt obligations on more favorable terms
than those granted to the company;
• share repurchase programs proposed to the Ordinary General Shareholders’ Meeting, financings that are material or that may substantially alter the financial
structure of the company, with the exception of financings used to manage the debt of the company, to optimize it within the thresholds already approved;
• acquisitions, in any form, over €300 million;
• granting of sureties, endorsements and guarantees, by the Management Board, in favor of third parties provided that each individual obligation does not
exceed €100 million and that all obligations do not exceed €1 billion. This authorization, which is given to the Management Board for 12 months, is
reviewed every year;
• substantial internal restructuring transactions together with transactions falling outside the publicly disclosed strategy of the company and strategic
partnership agreements;
• setting up stock option plans or performance share plans or any other mechanisms with a similar purpose or effect;
• granting of stock options or performance shares to members of the Management Board and establishing the terms and conditions applicable to each member
of the Management Board with respect to shares remitted upon the exercise of stock options and which they must keep during their terms of office; and
• submission of proposals to the Shareholders’ Meeting to amend the company’s by-laws, to allocate profits and to set the dividend.
3.1.1.10. Information Provided to the Supervisory Board
Members of the Supervisory Board receive all necessary information to perform their duties. Before any meeting, they may request all documents which they consider
useful. The right of members of the Supervisory Board to obtain information is subject to the practical terms and conditions set out below.
Information provided prior to meetings of the Supervisory Board
The Chairman of the Supervisory Board, with the assistance of the Secretary of the Board, sends the appropriate information to the other members of the Board
depending on the matters on the agenda.
Information provided to the Supervisory Board on a regular basis
Members of the Supervisory Board are kept informed by either the Management Board or its Chairman of the financial position, cash flows and obligations of the
company on a regular basis, as well as of any major events and transactions relating to the company. The Management Board provides a quarterly report to the
Supervisory Board on its activities and the group’s operations.
Requests for information from members of the Supervisory Board relating to specific matters are sent to the Chairman and to the Secretary of the Board who,
in coordination with the Chairman of the Management Board, is responsible for responding to such requests as soon as reasonably practicable. To supplement
the information provided to them, members of the Supervisory Board are entitled to meet with board members and the senior managers of the company, with
or without the presence of the members of the Management Board, after notice has been given to the Chairman of the Supervisory Board.
.
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Collective nature of the Supervisory Board’s deliberations and confidentiality of information
The Supervisory Board is a collegial body. Its deliberations engage the responsibility of all of its members. Members of the Supervisory Board and any person
attending meetings of the Supervisory Board are bound by confidentiality obligations with respect to confidential information they receive in the context of meetings
of the Board and any of its Committees or information that is identified as confidential and which is presented by the Chairman of the Supervisory Board or the
Management Board.
If the Supervisory Board is aware of confidential information of a precise nature which, if published, could have even an immaterial impact on the share price of the
company or of the companies under its control, as such term is defined by Article L.233-3 of the French Commercial Code, members of the Supervisory Board must
refrain from both disclosing such information to any third party and from dealing in the company’s securities until such information has been made public.
3.1.1.11. Activities of the Supervisory Board in 2010
In 2010, the Supervisory Board met eight times. The average rate of attendance at Board meetings was 95%. It considered, among others, the following matters:
• the review of the consolidated and statutory financial statements for fiscal year 2009, the 2010 budget, information contained in the half-year 2010
consolidated financial statements prepared by the Management Board and the 2011 preliminary budget;
• the review of the resolutions drafted by the Management Board and submitted to the General Shareholders’ Meeting of April 29, 2010;
• the review of the quarterly reports prepared by the Management Board;
• the assessment of the quality and structure of the Group’s balance sheet;
• refinancings of the company’s debt;
• operational progress of the Group’s main operations;
• the Group’s internal and external growth prospects, principal strategic initiatives and opportunities and the 5-year strategic plan;
• the strategy and communication regarding the position of the Group’s main business units;
• innovation within the Group;
• monitoring the sale of the equity interest held by Vivendi in NBC Universal, the repurchase of the equity interest held by M6 in Canal+ France
and the exercise by the Lagardère group of its liquidity rights to 20% of Canal+ France;
• the review of the opportunity to repurchase Vodafone’s equity interest in SFR;
• the review of potential acquisitions of equity stakes in certain emerging countries;
• the monitoring of current investigations and legal proceedings, in particular the “Securities class action” in the United States;
• telecommunications disputes in Poland and the approval and implementation of the agreement ending such disputes;
• the review of the representation of women on the Supervisory Board and its committees;
• the evaluation of the Supervisory Board and its Committees;
• the compensation for the Chairman of the Supervisory Board;
• the composition of the members of Management Board;
• the evaluation of the Management Board and its Chairman; the determination of compensation for the members of the Management Board; and
• the grant, subject to performance conditions, of stock options and performance shares to the members of the Management Board.
3.1.1.12. Assessment of the Supervisory Board’s Performance
In February 2011, as with every year, one item on the agenda was dedicated to a discussion of the performance of the Supervisory Board.
On a regular basis, and at least once every three years, the Supervisory Board performs a formal assessment of its performance under the direction of the Corporate
Governance and Nominating Committee.
This formal assessment was most recently completed in January 2009. The assessment was based on a questionnaire given to each member of the Supervisory
Board and one-on-one interviews organized by the General Counsel. The report was presented to the Corporate Governance and Nominating Committee and to the
Supervisory Board on February 26, 2009. The assessment found that the performance of the Supervisory Board and decision-making practices within the company
was satisfactory and consistent with French and international corporate governance best practices. A small number of additional provisions have been implemented
to improve the quality of the Supervisory Board’s work.
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3.1.1.13. Recommendations of the AFEP and MEDEF
Vivendi applies the Consolidated Code of Recommendations of the AFEP and the MEDEF to corporate governance.
3.1.1.14. Committees of the Supervisory Board
Organization and operating procedures of the Committees
The Supervisory Board has established the following four specialized Committees and has approved their respective composition and the powers conferred upon
them: the Strategy Committee, the Audit Committee, the Human Resources Committee and the Corporate Governance and Nominating Committee.
The purpose and functions of each Committee may not have the effect of delegating to a Committee powers granted to the Supervisory Board by law or by the
company’s by-laws, or the reduction or limitation of the powers of the Management Board. Within the scope of the powers granted to it, each Committee issues
proposals, recommendations and/or advice.
The Supervisory Board has appointed a Chairman for each Committee. The four Committees of the Supervisory Board are comprised of Supervisory Board members,
appointed by the Supervisory Board. The members are appointed on a personal basis and cannot be represented by a delegee. Each Committee determines the
frequency of its meetings which are held at the registered office of the company or in any other place that may be agreed by the Chairman of the Committee.
Committee meetings can also be held using videoconferencing or telecommunications technology.
The Chairman of each Committee sets the agenda for the meetings, after consultation with the Chairman of the Supervisory Board. Minutes of each Committee
meeting are drafted by the Secretary of the Board, under the authority of the Chairman of the relevant Committee, and are transmitted to the members of the
relevant Committee and to all the other members of the Supervisory Board. Information about the Committee’s work is included in this document.
Each Committee may request from the Management Board any document it deems useful for the fulfillment of its purpose and functions. The Committee may carry
out or commission surveys to provide information for the Supervisory Board’s discussions and may request external consulting expertise as required.
The Chairman of a Committee may invite the members of the Supervisory Board, as well as any other person to attend a meeting of such Committee. However, only
members of the Committee can take part in its deliberations.
In addition to the permanent Committees, the Supervisory Board may establish ad hoc committees comprised of all or some of its members, each for a limited term
and for specific purposes which are exceptional by virtue of their importance or nature.
The Supervisory Board, at its meeting held on Thursday, April 29, 2010, reviewed the composition of the Committees due to the end of four members’ terms of office
and the appointment of four new members by the Shareholders’ Meeting held that same day.
Strategy Committee
Composition
The Strategy Committee is currently comprised of five members, all of whom are independent. Its members are: Claude Bébéar (Chairman), Jean-Yves Charlier,
Philippe Donnet, Aliza Jabès and Jacqueline Tammenoms Bakker.
Activities
The Strategy Committee met twice in 2010, including a three-day seminar. The attendance rate was 100%. The committee’s activities mainly related to the
following matters:
• the growth prospects of the Group, major strategic initiatives and opportunities and the 5-year strategic plan;
• the company’s share ownership;
• the financial position of the Group;
• a review of the economic, market and financial environment;
• investment prospects and projects;
• development of the Group’s operations in emerging countries;
• innovation within the Group;
• monitoring of Canal+ France’s share ownership; and
• review of the opportunities to repurchase Vodafone’s equity interest in SFR.
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Audit Committee
Composition
The Audit Committee is comprised of five members, four of whom are independent and all of whom have finance or accounting expertise. Its members are:
Henri Lachmann (Chairman), Daniel Camus, Jean-Yves Charlier, Aliza Jabès and Pierre Rodocanachi.
Activities
Following their appointment, members of the Committee are, as needed, informed of the accounting, financial and operational standards used within the company
and the Group.
In 2010, the Audit Committee met three times in the presence of the Statutory Auditors of the company. The attendance rate was 100%. The Audit Committee
received information from, among others, the Statutory Auditors of the company, the Chief Financial Officer, the Deputy Chief Financial Officers, the General Counsel,
the Senior Vice President Head of Legal Department and the Senior Vice President Audit and Special Projects.
Its activities primarily comprised the review of:
• the financial statements for fiscal year 2009, the 2010 half-year financial statements and the Statutory Auditors’ reports;
• the report of the Chairman of the Supervisory Board on the conditions for preparing and organizing the work of the Supervisory Board and internal control
and risk management procedures;
• the financial position of the Group, its debt and liquid assets;
• the process for closing the accounts of certain subsidiaries;
• the internal audit of the headquarters and subsidiaries and internal control procedures within the Group;
• the analysis of risks and associated key audits;
• the activities of the Risks Committee;
• the fees to be paid to Statutory Auditors;
• the renewal of the term of one of the Statutory Auditors and its 2011 draft audit;
• the implementation and follow-up of compliance procedures as applied within each business unit;
• the main changes in the commitments given by the Group;
• the ex-post review of the Reference Document for the fiscal year 2009 as performed by the AMF;
• the main legal proceedings, in particular the “Securities Class Action” in the United States; and
• the disputes over telecommunications assets in Poland and the implementation of the agreements to end them.
Human Resources Committee
Composition
The Human Resources Committee has four members, three of whom are independent. Its members are: Pierre Rodocanachi (Chairman), Maureen Chiquet,
Henri Lachmann and Jacqueline Tammenoms Bakker.
Activities
In 2010, the Human Resources Committee met three times. The attendance rate was 92%. It considered, among others, the following matters:
• the fixed and variable compensation, representation and travel expenses of the members of the Management Board and its Chairman
and the top executives;
• the compensation of the Chairman of the Supervisory Board;
• the stock option and performance share plans for corporate officers and employees of the Group and the allocation policy of such plans;
• the review and definition of the performance conditions applicable to stock option and performance share plans to be granted subject
to renewal upon approval by the Combined Shareholders’ Meeting to be held on April 21, 2011;
• a review of the employment contracts of certain executives of the Group and business units;
• the review of the succession plans within the Group;
• the development and retention of key employees; and
• the annual capital increase and the leveraged share purchase plans reserved for employees of the Group.
Corporate Governance and Nominating Committee
Composition
The Corporate Governance and Nominating Committee is comprised of five members, three of whom are independent. Its members are: Jean-René Fourtou
(Chairman), Claude Bébéar, Dominique Hériard Dubreuil, Henri Lachmann and Christophe de Margerie.
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Activities
The Corporate Governance and Nominating Committee met twice in 2010. The attendance rate was 100%. Its activities primarily focused on the following matters:
• the selection and proposed nomination of new members of the Supervisory Board in 2010;
• the constitution of the Supervisory Board and its Committees, particularly the ratio of men to women;
• the evaluation of the functioning of the Supervisory Board, the Management Board and its Chairman;
• the prevention of insider trading having regard to the AMF recommendation of November 3, 2010; and
• the review of the internal rules of the Supervisory Board and the Management Board.
3.1.2. Management Board
3.1.2.1. General Provisions
In accordance with Vivendi’s by-laws (Article 12), the Management Board shall be comprised of a minimum of two members and a maximum of seven members.
Members of the Management Board are appointed by the Supervisory Board to serve four-year terms.
The mandatory retirement age for members of the Management Board is 68 years of age. However, when a member of the Management Board reaches the age
of 68, the Supervisory Board may prolong his or her term, on one or more occasions, for a period not exceeding two years in total (Article 12 of Vivendi’s by-laws).
3.1.2.2. Composition of the Management Board
The Management Board is currently comprised of six members, including three French citizens, one German citizen, one Moroccan citizen and one British citizen.
The Supervisory Board, at its meeting held on February 26, 2009, renewed the terms of office of the members of the Management Board and its Chairman for a four-year
period, until April 26, 2013, except for Mr. Lucian Grainge, who was appointed as a new member by the Supervisory Board at its meeting held on April 29, 2010 for a
period expiring on the same date as the terms of the other Members of the Managerment Board.
In 2010, the Management Board met a total of fourteen times. The attendance rate at Management Board meetings was 96%. In accordance with Article 14 of Vivendi’s
by-laws, a member of the Management Board may attend meetings by videoconference or teleconference.
Detailed information about individual members of the Management Board is provided below in the “Main activities of current members of the Management Board” section.
List of the Management Board Members
Primary Position
Number of shares held directly
or through the PEG*
Chairman
Chairman of the Management Board of Maroc Telecom
Chief Financial Officer of Vivendi
Chairman and Chief Executive Officer of SFR
Chairman – Chief Executive Officer of UMG
Chairman of the Management Board of Groupe Canal+
(a) 285,854
56,300
72,051
199,888
10,000
(b) 198,047
Full Name
Jean-Bernard Lévy
Abdeslam Ahizoune
Philippe Capron
Frank Esser
Lucian Grainge
Bertrand Meheut
(a) In addition, his minor-age daughter holds 3,197 company shares and his spouse holds 1,000 company shares.
(b) In addition, his spouse holds 373 company shares.
* Shares held in the Group Savings Plan (PEG) are valued on the basis of Vivendi’s share price at the close of business on December 31, 2010, i.e., €20.20.
Main activities of current members of the Management Board
Jean-Bernard Lévy, Chairman of the Management Board
French citizen.
Business address
Born on March 18, 1955, Mr. Jean-Bernard Lévy is an alumnus of the Ecole Polytechnique and Telecom-ParisTech. Jean-Bernard Lévy was appointed Chairman
of the Vivendi Management Board on April 28, 2005. He joined Vivendi in August 2002 as Chief Executive Officer. From 1998 to 2002, Mr. Lévy was Chief Executive
Officer then Managing Partner, Corporate Finance at Oddo & Cie. He was Chairman and Chief Executive Officer of Matra Communication from 1995 to 1998. From 1993 to 1994,
Mr. Lévy was Chief of Staff to Mr. Gérard Longuet, the French Minister for Industry, Postal Services, Telecommunications and Foreign Trade. From 1988 to 1993, he was General
Manager, Communication Satellites of Matra Marconi Space. From 1986 to 1988, Mr. Lévy acted as Technical Adviser to Mr. Gérard Lonquet, the French Minister for Postal and
Telecommunications Services and from 1978 to 1986, he was an engineer with France Télécom.
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Vivendi Group
Activision Blizzard, Inc. (United States), Chairman
Maroc Telecom (Morocco), Vice Chairman of the Supervisory Board
Canal+ France, Chairman of the Supervisory Board
GVT Holdings SA (Brazil), Chairman of the Board of Directors
Groupe Canal+, Vice Chairman of the Supervisory Board
SFR, Director
Société Générale, Director
Vinci, Director
Institut Pasteur, Director
Viroxis, Chairman of the Supervisory Board
Institut Télécom, Chairman of the Board of Directors
Paris Europlace, Member of the Orientation Committee
NBC Universal, Inc. (United States), Director
Vivendi Games, Inc. (United States), Director
UGC, Director
Abdeslam Ahizoune, Member of the Management Board
Moroccan citizen.
Business address
Maroc Telecom – Avenue Annakhil, Hay Riad, Rabat – Morocco.
Born on April 20, 1955, Mr. Abdeslam Ahizoune holds an engineering degree from Telecom ParisTech (1977). He has been Chairman of the Maroc Telecom
Management Board since February 2001 and was appointed as a member of the Vivendi Management Board on April 28, 2005. Since late 2008, he has been
Chairman of the Moroccan Association of Telecom Professionals (MATI). Until January 2010, he was Chairman and Chief Executive Officer of Medi1Sat, the Moroccan
channel now called Medi 1 TV, where he remains a Director.
Mr. Ahizoune served as Chairman and Chief Executive Officer of Maroc Telecom from 1998 to 2001. He held the positions of Minister of Telecommunications from
1997 to 1998 and Managing Director of the Office National des Postes et Télécommunications (ONPT) from February 1995 to August 1997, Minister of Postal and
Telecommunications Services and Managing Director of the ONPT from August 1992 to February 1995 and Director of Telecommunications in the Ministry of Postal
and Telecommunications Services from 1983 to 1992. Since late 2006, he has been President of the Royal Moroccan Athletic Federation.
Maroc Telecom Group
Maroc Telecom (Morocco), Chairman of the Management Board
Axa Assurance Maroc (Morocco), Director
Holcim SA (Morocco), Director
Medi 1 TV (formerly Medi1Sat) (Morocco), Director
Royal Moroccan Federation of Athletics (Morocco), Chairman
Lalla Salma Association Against Cancer (Morocco), Member of the Board of Directors
Mohammed V Foundation for Solidarity (Morocco), Member of the Board of Directors
Mohammed VI Foundation for the Environment (Morocco), Member of the Board of Directors
Al Akhawayne University (Morocco), Director
Moroccan Association of Telecom Professionals (MATI)
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CMC SA (Mauritania), Chairman of the Board of Directors
Mauritel SA (Mauritania), Permanent representative of Maroc Telecom, Director
Mauritel Mobiles (Mauritania), Director
Onatel (Burkina Faso), Director
Mobisud SA (France), Chairman of the Board of Directors
Gabon Telecom (Gabon), Director
Medi1Sat (Morocco), Chairman-Chief Executive Officer
Association du Club Entreprendre, Chairman
Philippe Capron, Member of the Management Board
French Citizen.
Business address
Mr. Philippe Capron was born on May 25, 1958 in Paris and is a graduate of the Ecole des Hautes Etudes Commerciales and of the Paris Institut d’Etudes Politiques.
From 1979 to 1981 he was an assistant to the Chairman and Secretary of the Board of Directors of Sacilor. After leaving the Ecole Nationale d’Administration (ENA)
in 1985, he became an Inspector of Finance. Advisor to the Chairman and CEO of Duménil Leblé (the Cérus group) from 1990 to 1992, he then became a Partner in the
strategy consulting firm, Bain & Company from 1992 to 1994. From 1994 to 1997 he was the director of international development and a member of the Executive
Committee of the Euler group, and then was Chairman and CEO of Euler-SFAC from 1998 to 2000. In November 2000, he joined the Usinor group as Chief Financial
Officer and was also a member of the Executive Committee until 2002 when he was appointed Executive Vice-President of the Arcelor group, responsible for the
packaging steels division and then the distribution and international trading businesses. At the beginning of 2006, he became Chief Financial Officer and a member
of the Management Committee of Arcelor.
In January 2007, Mr. Philippe Capron joined Vivendi as Chief Administrative Officer. He was appointed to the Management Board and as Chief Financial Officer in April 2007.
Vivendi Group
Activision Blizzard, Inc. (United States), Director
Maroc Telecom (Morocco), Member of the Supervisory Board and Chairman of the Audit Committee
SFR, Director and Chairman of the Audit Committee
Groupe Canal+, Member of the Supervisory Board
Canal+ France, Member of the Supervisory Board and Chairman of the Audit Committee
GVT Holdings SA (Brazil), Director
Groupe Virbac, Member of the Supervisory Board and Chairman of the Audit Committee
Tinibu Square, Director
Member of the Société d’Economie Politique
NBC Universal, Inc. (United States), Director
Vivendi Games, Inc. (United States), Director
Sollac Ambalaj (Turkey), Chairman of the Board of Directors
Arcelor International (Luxembourg), Chairman
Arcelor Projects (Luxembourg), Chairman
Arcelor Treasury (Luxembourg), Manager
Skyline (USA), Chairman of the Board of Directors
Achatpro, Chairman of the Supervisory Board
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Frank Esser, Member of the Management Board
German citizen.
Business address
SFR – Tour Séquoia, 1, place Carpeaux, 92915 Paris La Défense cedex – France.
Mr. Frank Esser was born on September 5, 1958 and holds a doctorate in economics from the University of Cologne. Mr. Esser was appointed Chairman of SFR
in December 2002 and has been with the SFR group since September 2000, when he was appointed Chief Executive Officer. He was appointed to Vivendi’s
Management Board on April 28, 2005. He is also President of the French Telecommunications Federation. Prior to joining SFR, Mr. Esser was Executive Vice
President at Mannesmann, in charge of international business and business development.
SFR, Chairman and Chief Executive Officer
Société Financière de Communication et du Multimédia, Member of the Supervisory Board
Vivendi Telecom International, Director
Fédération Française des Télécoms et des communications électroniques, President
Medef, Member of the Executive Committee
Vodafone D2 GmbH and Arcor (Germany), Member of the Supervisory Board
Faurecia, Director
LTB-R, Permanent Representative of SFR on the Board of Directors
Neuf Cegetel, Chairman and Chief Executive Officer
SHD, Chairman and Chief Executive Officer
Vizzavi France, Chairman
Maroc Telecom (Morocco), Member of the Supervisory Board
Lucian Grainge, Member of the Management Board
British citizen.
Business address
Universal Music Group – 2220 Colorado Avenue, Santa Monica 90404, California, USA.
Born on February 29, 1960, Mr. Lucian Grainge has spent his entire professional career in the music sector. He joined Universal Music in 1986 to launch PolyGram
Music Publishing UK. He was then appointed Vice Chairman of Universal Music UK, of which he became Chairman in 2001. On July 1, 2010, he became Co-Chief
Executive Officer of Universal Music Group, on January 1, 2011, he became Chief Executive Officer and on March 9, 2011, he was appointed Chairman and Chief
Executive Officer of Universal Music Group.
Lucian Grainge spearheaded the international expansion of Universal Music, especially in the digital field, and its investments in such sectors as entertainment
products, live event production and artist services, including the management of classical musicians and performers. He contributed to the development of
technological partnerships and worked with lyricists and artist at every stage of his career, notably U2, Elton John, Abba and Amy Winehouse.
In 2008, he was awarded the prestigious Music Industry Trusts Award Prize and was recognized as one of the most accomplished managers in the world of music.
Universal Music Group, Inc. (USA), Chairman and Chief Executive Officer and Director of various foreign subsidiaries
Universal Music Group International (UK), Chairman and Chief Executive Officer
Activision Blizzard Inc. (United States), Director.
Globe Productions Limited, (UK), Director
Go! Discs Limited, (England), Director
Go! Records Limited (England), Director
Mercury Records Limited, (England), Director
Polydor Limited, (England), Director
Serious Records Limited, (England and Wales), Director
Systemtactic Limited, (England), Director
Universal Music Operations Limited, (England), Director
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Universal Music UK Limited, Chairman
Universal-Island Records Limited, (England), Director
The Roundhouse Trust, (UK), Director
The British Phonographic industry Limited (UK), Director
British Record Industry Trust Limited, (UK), Director
Bertrand Meheut, Member of the Management Board
French Citizen.
Business address
Groupe Canal+, 1, place du Spectacle, 92263 Issy Les Moulineaux cedex 9 – France.
Mr. Bertrand Meheut was born on September 22, 1951 and graduated from l’Ecole des Mines in France. He joined Groupe Canal+ in October 2002 as Vice Chairman
and Chief Operating Officer. He was appointed Chairman of the Management Board of Groupe Canal+ on February 7, 2003, and Chairman and Chief Executive Officer
of Canal+ SA on February 20, 2003. Mr. Meheut was appointed to Vivendi’s Management Board on April 28, 2005.
Before he joined the Canal + Group, Mr. Meheut spent most of his career in various positions in the chemicals industry, primarily in the life sciences sector. He held
a number of top executive positions at Rhône-Poulenc, which became Aventis after merging with Germany’s Hoechst. He served as Chairman and Chief Executive
Officer of Aventis CropScience, an Aventis and Schering subsidiary, running agrichemicals and biotechnologies operations.
Canal+ Group
Canal+, Chairman of the Board of Directors
Groupe Canal+, Chairman of the Management Board
Canal+ France, Chairman of the Management Board
Canal+ Active, Chairman
StudioCanal, Chairman of the Supervisory Board
Kiosque, Permanent Representative of Groupe Canal+ and Managing Partner
Canal Overseas, Member of the Management Board
Canal+ Editions, Permanent representative of Groupe Canal+ and Co-Manager
Sport+, Permanent Representative of Groupe Canal+ on the Board of Directors
Accor, Director
Aquarelle, Director
Edenred (formerly Accor Services), Director
Cinémathèque, Director
Canal+, Chairman and Chief Executive Officer
Canal+ Distribution, Chairman of the Board of Directors
Kiosque Sport, Chairman of the Board of Directors
Cegetel, Director
StudioCanal, Chairman of the Board of Directors
Holding Sports & Evénements, Chairman of the Board of Directors
NPA Production, permanent representative of Canal+ and Manager
Multithématiques, Director
PSG Football, Director
CanalSatellite, Director
Canal+ Active, Chairman
Société d’exploitation d’un service d’exploitation (SESI), permanent representative of its Manager, Canal+
SFR, Director
Canal+ International Développement, Chairman of the Board of Directors
Canal+ Finance, Permanent Representative of Canal+ on the Board of Directors
100
3.1.2.3. Family Relationships
To the company’s knowledge, no family relationships exist between any of the members of the Management Board or between any of them and any member
of the Supervisory Board.
3.1.2.4. Absence of Conflicts of Interest
To the company’s knowledge, there are no actual or potential conflicts of interest between Vivendi and the members of the Management Board with regard
to their personal interests or other responsibilities.
3.1.2.5. Absence of any Sentence for Fraud, Liability Associated with a Business Failure or Public Incrimination and/or Sanction
To the company’s knowledge, over the past five years, no member of the Management Board has been convicted of any fraud-related matter, no official public
incrimination and/or sanction has been delivered against any member of the Management Board, no member of the Management Board has been associated
with a bankruptcy, receivership or liquidation while serving on an administrative, management or supervisory body of a public company nor has been prevented
by a court from acting as a member of an administrative, management or supervisory body or from participating in the management of a public issuer.
Mr. Philippe Capron, in his capacity as former permanent representative of Arcelor Packaging International and Director of the SAFET company, is cited along
with other former members of the SAFET Board of Directors in the proceedings related to an insolvency action filed on May 26, 2008.
3.1.2.6. Agreements between the Company and Members of the Management Board – Service Contracts
Members of the Management Board benefit from an employment contract with the company, except for Mr. Jean-Bernard Lévy, Chairman of the Management Board,
whose employment contract has been suspended since April 28, 2005, the date of his appointment as Chairman. Upon renewal of his term on the Management Board
and as Chairman of the Management Board, in April 2009, Mr. Lévy waived his employment contract, in compliance with the AFEP and MEDEF recommendations of
October 2008 on the compensation of corporate officers of publicly traded companies.
No member of the Management Board is party to a service agreement entered into with Vivendi or any of its subsidiaries, pursuant to which such member may be
entitled to receive any benefits.
3.1.2.7. Loans and Guarantees granted to Members of the Management Board
The company has not granted any loans or issued any guarantees to any member of the Management Board.
3.1.2.8. Jurisdiction and Internal Regulations of the Management Board
Authority and functions of the Management Board under applicable law and the company’s by-laws
With respect to third parties, the Management Board is granted the broadest powers to act in any circumstance on behalf of the company, subject to the scope of
the company’s corporate purpose and to those situations where such power is expressly granted to the Supervisory Board and/or the Shareholders’ Meetings and
to matters that require the prior approval of the Supervisory Board.
Internal Regulations
The Internal Regulations of the Management Board is an internal document intended to ensure that the company’s Management Board functions properly and adheres
to the most recent rules adopted in furtherance of good corporate governance. Third parties cannot rely on the Internal Regulations when seeking recourse against
members of the Management Board.
The Management Board is responsible for the day-to-day management of the company and for the conduct of its business. Pursuant to the law, the bylaws
and the Supervisory Board’s internal regulations, it must obtain prior authorization from the Supervisory Board in certain circumstances.
3.1.2.9. Activities of the Management Board in 2010
In 2010, the Management Board met a total of fourteen times. It considered, among others, the following matters:
• the review and approval of the statutory and consolidated financial statements for fiscal year 2009, the 2010 budget, the quarterly and half-year 2010
financial statements and the 2011 preliminary budget;
• the preparation of quarterly reports for the Supervisory Board;
• the financial position of the Group;
• the assessment of the quality and structure of the Group’s balance sheet;
• refinancings of the company’s debt;
• the works of the Group’s Internal Audit department;
• the renewal of the Euro Medium Term Notes (EMTN) program and the issue of bonds;
101
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the review of commitments given or received;
growth forecasts for the Group, principal strategic initiatives and opportunities as well as the 5-year strategic plan;
innovation within the Group and establishment of an Innovation Division;
the Group’s financial communications;
the outlook for each of the Group’s businesses based on the financial situation and their operations within the economic environment;
the market position of the Group’s main business units;
the sale of the equity interest held by Vivendi in NBC Universal, the repurchase of the equity interest held by M6 in Canal+ France and monitoring
of the exercise by the Lagardère group of its liquidity rights with respect to its 20% equity interest in Canal+ France;
the review of the opportunity to repurchase Vodafone’s equity interest in SFR;
internal legal structure rationalization of certain UMG subsidiaries;
changes to the regulations and tax regime applicable to the Telecommunications sector in France;
calling of the General Shareholders’ Meeting of April 29, 2010;
the grant of stock options and performance shares and the setting of the corresponding performance conditions;
development and retention of key employees;
capital increases reserved to group employees;
the monitoring of legal investigations and proceedings, including the “Securities class action” in the United States;
monitoring of telecommunications assets in Poland, approval and implementation of the agreement to end telecommunications disputes in Poland;
the Group’s communications plan and its image development;
the review of the Sustainable Development report;
the review of the business report and the environmental and employee data report; and
the review of the Compliance Program.
3.2. Compensation of Directors and Officers
3.2.1. Compensation of the Members of the Supervisory Board and its Chairman
3.2.1.1. Compensation of the Chairman of the Supervisory Board
Upon the recommendation of the Human Resources Committee, at its meeting held on February 24, 2010, and at the Chairman’s request, the Supervisory Board, at its
meeting held on February 25, 2010, resolved to set the compensation of the Chairman of the Supervisory Board at €700,000 begining May 1, 2010. He has use of a
company car and the availability of a part-time driver. His travel expenses and other expenditures incurred in connection with his duties are paid for by the company.
Compensation paid to the Chairman of the Supervisory Board (in euros)
Fixed remuneration
2005*
2006
2007
2008
2009
2010**
666,667
1,000,000
1,000,000
1,000,000
1,000,000
800,000
* Chairman of the Supervisory Board since April 28, 2005.
** Prorated.
3.2.1.2. Directors’ Fees
Within the limitations set forth by the Combined Shareholders’ Meeting held on April 24, 2008 (i.e., €1.5 million per year), the payment of directors’ fees to members
of the Supervisory Board is based on actual attendance at meetings and depends on the number of meetings held by the Supervisory Board and the Committees. The
Supervisory Board, at its meeting held on March 6, 2007, resolved that, from 2007, directors’ fees would be paid on a half-yearly basis. The gross amount of directors’
fees paid in 2010 was €1,121,506. Details of directors’ fees paid on an individual basis are set out below.
The directors’ fees are allocated as follows: Each member of the Supervisory Board receives a fixed director’s fee of €23,000 for a full year of service and a variable
amount of €4,100 for each meeting attended. Each member of the Audit Committee receives a fixed director’s fee of €20,000 for a full year of service, this amount
is doubled for the Chairman of the Committee, and a variable amount of €3,900 for each meeting attended. Each member of the Strategy Committee, the Human
Resources Committee and the Corporate Governance and Nominating Committee receives a fixed director’s fee of €16,100 for a full year of service, which is doubled
for the Chairman of each of the Committees, and a variable amount of €3,300 for each meeting attended. A fee of €1,500 per meeting is paid to members of the
Supervisory Board who attend meetings of Committees of which they are not members. Members of the Supervisory Board do not receive any other compensation
from the company.
102
Individual amount of directors’ fees and other compensation received by members of the Supervisory Board
(in euros – rounded) (Table 3 of the AMF recommendations):
Amounts paid for 2009
Amounts paid for 2010
None
123,467
115,000
na
102,800
49,175
82,300
102,800
100,167
34,701
125,245
na
na
154,678
33,201
50,775
146,400
na
54,700
1,275,409
None
109,100
33,645
60,243
110,200
75,900
9,363
88,300
28,382
na
37,020
53,118
74,680
157,700
na
75,900
135,600
72,355
na
1,121,506
Jean-René Fourtou (a)
Claude Bébéar
Gérard Brémond (g)
Daniel Camus (f)
Jean-Yves Charlier
Maureen Chiquet (b)
Mehdi Dazi (c)
Philippe Donnet
Fernando Falcó y Fernández de Córdova (g)
Sarah Frank (d)
Gabriel Hawawini (g)
Dominique Hériard Dubreuil (f)
Aliza Jabès (f)
Henri Lachmann
Andrzej Olechowski (d)
Christophe de Margerie (b)
Pierre Rodocanachi
Jacqueline Tammenoms Bakker (f)
Karel Van Miert (e)
Total
na: not applicable.
(a) Mr. Fourtou waived his rights to receive directors’ fees payable to board members of the company and its subsidiaries.
(b) Members of the Supervisory Board since April 30, 2009.
(c) Member of the Supervisory Board until February 18, 2010.
(d) Member of the Supervisory Board until April 30, 2009.
(e) Member of the Supervisory Board until June 23, 2009.
(f) Members of the Supervisory Board since April 29, 2010.
(g) Members of the Supervisory Board until April 29, 2010.
3.2.2. Compensation of Members and Chairman of the Management Board
Compensation of corporate officers and the company’s senior executives is determined by the Supervisory Board upon recommendation of the Human Resources
Committee. Compensation is comprised of both a fixed component and a variable component.
For 2010, following a recommendation of the Human Resources Committee, at its meeting held on February 25, 2010, the Supervisory Board set the variable
component of compensation based on the following criteria:
• for corporate officers and executives at the corporate offices:
financial objectives: 68% (tied to the group’s adjusted net income (43%) and operating cash flow (25%)); and
completion of the General Management’s priority measures: 32% (the proper integration of GVT in Brazil and the achievement of its annual goals;
valuation of the Telecoms litigation in Poland; the development and completion of joint initiatives between subsidiaries; actions to encourage
sustainable development and social responsibility. These last two goals were also consistently developed at the subsidiary level and supplemented
by their own unique set of goals.
• for subsidiary corporate officers, chairpersons or executives according to the following criteria:
(a) group financial objectives: 15% (Adjusted net income, operating cash flow);
(b) financial objectives for their entity: 60% (EBITA, operating cash flow and ROCE); and
(c) priority measures for their entity: 25%, of which 5% for priority sustainable development and social responsibility measures within their entity.
The Supervisory Board, at its meeting held on February 28, 2011, after a review by the Human Resources Committee, and after having noted that the criteria applicable
to the determination of the variable component for 2010 had been fulfilled, resolved, for 2011, to set new criteria to determine the variable component as follows:
• for corporate officers and executives at the corporate offices:
financial objectives: 60% (tied to the group’s adjusted net income (40%) and operating cash flow (20%)); completion of the General Management’s
priority measures: 40% (achieve the strategy to purchase minority interests, in particular at SFR, under satisfactory financial conditions, or find a major
alternative use that makes sense from a strategic and financial standpoint; launch innovative projects and partnerships in businesses adjacent to current
businesses; show concrete improvements in cooperation between businesses; and develop and arrange for the certification of actions in relation to the
103
group’s social challenges, including: cultural diversity, sharing of knowledge and protection of youth, etc; these last two goals were also consistently
developed at the subsidiary level and supplemented by their own unique set of goals).
• for subsidiary corporate officers, chairpersons or executives according to the following criteria:
(a) group financial objectives: 15% to 20% (Adjusted net income and operating cash flow);
(b) financial objectives for their entity: 55 to 60% (EBITA, operating cash flow and ROCE); and
(c) priority measures for their entity: 25 to 30%, of which 5% for priority sustainable development and social responsibility measures within their entity.
Summary of the compensation, stock options and shares granted to members of the Management Board
(AMF recommendations, table 1):
In euros
Jean-Bernard Lévy
Chairman of the Management Board
Compensation for the year
Accounting valuation of options granted
Accounting value of performance shares granted
Total
Abdeslam Ahizoune
Member of the Management Board and Chairman of the Management Board of Maroc Telecom
Accounting value of options granted
Total
Philippe Capron
Member of the Management Board and Chief Financial Officer of Vivendi
Total
Frank Esser
Member of the Management Board and Chairman and Chief Executive Officer of SFR
Total
Lucian Grainge *
Member of the Management Board and Chairman and Chief Executive Officer of Universal Music Group
Total
Bertrand Meheut
Member of the Management Board and Chairman of the Management Board of Groupe Canal+
Total
FY 2009
FY 2010
2,498,087
842,400
396,900
3,737,387
2,834,998
716,400
414,000
3,965,398
1,450,158
374,400
176,409
2,000,967
1,724,163
358,200
207,000
2,289,363
871,890
374,400
176,409
1,422,699
980,337
318,400
184,009
1,482,746
1,804,077
524,160
246,964
2,575,201
1,920,417
445,760
257,605
2,623,782
na
na
na
na
5,401,746
175,120
101,209
5,678,075
1,912,631
524,160
246,964
2,683,755
1,912,699
445,760
257,605
2,616,064
The accounting value presented in this table is calculated based on the number of options and performance shares originally granted.
na: not applicable.
*: Member of the Management Board since April 29, 2010.
104
3.2.2.1. Position and Compensation of the Chairman of the Management Board
Mr. Jean-Bernard Lévy waived his employment contract (which has been suspended since April 28, 2005, the date of his appointment as Chairman of the
Management Board) upon the renewal of his term of office on April 27, 2009, in accordance with the AFEP and MEDEF recommendations in relation to the
compensation of corporate officers of publicly traded companies.
During its meeting held on February 25, 2010, upon the recommendation of the Human Resources Committee, the Supervisory Board reviewed
Mr. Jean-Bernard Lévy’s situation. It was decided not to increase his compensation in 2010. The items related to his compensation and benefits in kind are as follows:
• fixed compensation for 2010: €912,400;
• variable compensation with target bonus of 140% and maximum bonus of 240%. This compensation is subject to the satisfaction of the financial objectives
and the Group’s priority measures mentioned in paragraph 3.2.2;
• eligibility to receive stock option grants, subject to the satisfaction of performance conditions set by the Supervisory Board and to the relevant plan
rules governing their acquisition and exercise;
• eligibility to receive performance share grants subject to the satisfaction of performance conditions set by the Supervisory Board and to the relevant
plan rules governing their acquisition and exercise;
• benefit of a car and a driver;
• payment of traveling expenses and expenses incurred during the exercise of his functions,
• eligibility to participate in the basic Social Security, AGIRC and ARRCO schemes;
• eligibility to participate in the additional pension plan of December 2005 as approved by the Combined Shareholders’ Meeting held on April 20, 2006; and
• eligibility to participate in the company’s insurance schemes (mutual and life-illness policies) subscribed for its employees, under similar conditions.
During its meeting held on February 28, 2011, upon the recommendation of the Human Resources Committee, the Supervisory Board decided to set the compensation
package for the Chairman of the Management Board as follows:
• fixed compensation for 2011: €1,000,000;
• variable compensation with target bonus of 140% and maximum bonus of 240%. This compensation is subject to the satisfaction of the financial objectives
and the Group’s priority measures mentioned in paragraph 3.2.2.;
• eligibility to receive stock option grants and performance shares, subject to the satisfaction of performance conditions set by the Supervisory Board and
to the relevant plan rules governing their acquisition and exercise;
• benefit of a car and a driver;
• payment of traveling expenses and expenses incurred during the exercise of his functions;
• eligibility to participate in the basic Social Security, AGIRC and ARRCO schemes;
• eligibility to participate in the additional pension plan of December 2005 as approved by the Combined Shareholders’ Meeting held on April 20, 2006; and
• eligibility to participate in the company’s insurance schemes (mutual and life-illness policies) subscribed for its employees, under similar conditions.
3.2.2.2. Compensation upon Termination of Employment of the Chairman of the Management Board
Pursuant to the AFEP and MEDEF recommendations in relation to the compensation for executive directors of listed companies, the Supervisory Board at its meeting
held on February 26, 2009, upon recommendations of both the Human Resources and the Corporate Governance and Nominating Committees, reviewed the situation
of Mr. Jean-Bernard Lévy, Chairman of the Management Board.
At its meeting held on February 26, 2009, the Supervisory Board resolved that, subject to a favorable vote at the Shareholders’ Meeting to be held on April 30, 2009,
Mr. Jean-Bernard Lévy would, save in the case of serious misconduct and subject to performance conditions, receive compensation upon termination of his term of office
in accordance with the AFEP and MEDEF recommendations. The Combined Shareholders’ Meeting of April 30, 2009 approved this compensation in its sixth resolution.
This compensation would be calculated using a formula linked to his seniority and would amount to six months’ pay plus one additional month’s pay for each year of service
within the Group after 2002. It would be subject to the satisfaction of the following minimum performance conditions: the compensation would not be payable if the
Group’s financial results (adjusted net income and cash flow from operations) were less than 2/3 of the Group’s budget for two consecutive years and if the performance
of Vivendi shares were lower than 2/3 of the average performance of a composite index (1/3 CAC 40, 1/3 DJ Stoxx Telco and 1/3 DJ Stoxx Media) for two consecutive
years. Compensation would not be payable if Mr. Jean-Bernard Lévy were to leave the company after the age of 62 years, at which time he would be entitled to assert
his pension rights, or if he decided, on his own initiative, to leave the company. By definition, the compensation to be paid would equal to 21 months or less.
At the same meeting, the Supervisory Board also resolved that if Mr. Jean-Bernard Lévy left the Company under the conditions set forth above and was entitled to
receive compensation, his rights to stock options and performance shares not yet acquired by him on the date of his departure would be maintained, subject to the
satisfaction of the relevant performance conditions and subject to the relevant plan’s rules in relation to the conditions governing their acquisition and exercise.
105
3.2.2.3. Compensation of Members of the Management Board
Summary of the compensation of each member of the Management Board (Table 2 of the AMF recommendations):
In euros
Jean-Bernard Lévy
Fixed compensation
Variable compensation for 2008
Exceptional compensation
Directors’ Fees
Benefits in kind*
Total
Abdeslam Ahizoune
Member of the Management Board
Fixed compensation
Directors’ Fees
Benefits in kind*
Total
Philippe Capron
Fixed compensation
Directors’ Fees
Benefits in kind*
Total
Frank Esser
Fixed compensation
Directors’ Fees
Benefits in kind*
Total
Lucian Grainge (a)
Fixed compensation
Directors’ Fees
Benefits in kind*
Total
2009
Amounts paid
Amounts due
2010
Amounts paid
Amounts due
912,400
1,683,100
na
na
7,235
2,602,735
912,400
1,578,452
na
na
7,235
2,498,087
912,400
1,578,452
na
na
6,558
2,497,410
912,400
1,916,040
na
na
6,558
2,834,998
591,039
892,104
na
na
8,079
1,491,222
591,039
851,040
na
na
8,079
1,450,158
612,894
856,861
na
na
8,060
1,477,815
612,894
1,103,209
na
na
8,060
1,724,163
344,800
535,600
-
344,800
504,787
344,800
504,787
na
na
22,303
902,703
na
na
22,303
871,890
na
na
28,689
878,276
344,800
606,848
na
na
28,689
980,337
726,700
1,060,000
na
na
30,929
1,817,629
726,700
1,046,448
na
na
30,929
1,804,077
726,700
1,046,448
na
na
30,997
1,804,145
726,700
1,162,720
na
na
30,997
1,920,417
na
na
na
na
na
na
na
na
na
na
na
na
2,989,559
na
na
na
na
835,960
3,825,519
2,989,559
1,576,227
na
na
835,960
5,401,746
106
2009
Amounts paid
In euros
Bertrand Meheut
Fixed compensation
Directors’ Fees
Benefits in kind*
Total
726,700
1,165,000
na
na
23,211
1,914,911
2010
Amounts paid
Amounts due
726,700
1,162,720
na
na
23,211
1,912,631
726,700
1,162,720
na
na
23,279
1,912,699
Amounts due
726,700
1,162,720
na
na
23,279
1,912,699
na: not applicable.
(a) Member of the Management Board since April 29, 2010 – annual basis.
* The amount of benefits in kind takes in to account employer retirement and provident contributions that exceed the legal deductible threshold, which are included
in the taxable wages, use of a company car, profit-sharing plans and expenses for moving abroad.
The members of the Management Board do not receive any compensation other than in accordance with their employment contract.
3.2.3. Summary of the Commitments Issued in Favor of the Chairman and the Members of the Management Board
(Information required pursuant to Table 10 of the AMF Recommendations)
Employment
Contract
Corporate officers as defined pursuant to the
AFEP/MEDEF
Jean-Bernard Lévy
Beginning of term: April 28, 2005
Renewal: April 27, 2009
End of term: April 26, 2013
Yes
Supplemental
pension plan
No
Yes
X
X
No
Compensation or other
benefits due or to be due in
connection with the
termination/ change
of function
Yes
No
Compensation under a
non-compete clause
Yes
X
No
X
Employment Contract
As corporate officers, members of the Management Board hold an employment contract, except for Mr. Jean-Bernard Lévy, Chairman of the Management Board,
who waived his employment contract, which has already been suspended since April 28, 2005, upon renewal of his term of office as both a member and Chairman
of the Management Board, in April 2009, in accordance with the AFEP and MEDEF recommendations in relation to the compensation for corporate officers of
publicly traded companies.
Pension plans
The Chairman, and the members of the Management Board, who hold an employment contract with Vivendi SA, are eligible, along with certain high-level managers,
to participate in the supplemental pension plan implemented in December 2005 and approved by the Combined Shareholders’ Meeting of April 20, 2006. Its features
are as follows: minimum of three years in office; gradual acquisition of rights based on seniority (over a 20-year period); reference salary for calculation of retirement:
average of the three most recent years; double maximum limit: reference salary, capped at 60 times the social security upper limit, currently €2,077,200; maximum
acquisition of rights capped at 30% of reference salary; application of the Loi Fillon: rights maintained in the event of departure at the employer’s initiative after 55
years; reverts to 60% in the event of death. Plan benefits are forfeited in the event of departure from the company, for whatever reason, before the age of 55.
For 2010, a provision of €2.471 million was recorded for obligations under the pension plan for members of the Management Board. In 2010, members of the
Management Board acquired pension rights under the supplemental pension plan, which were calculated on the basis of the fixed salary paid in 2010 together with
the amount of the variable portion for 2009, which was paid in 2010; this amount is capped at 60 times the social security upper limit which was €2,077,200 for 2010.
For the Chairman of the Management Board, the acquisition of rights is calculated based on a rate of 1% of the capped reference salary and represented 0.83% of his
gross salary (fixed + variable), which was €20,772 in 2010.
107
Compensation or other benefits due or to be due in connection with termination/ change of function
The Chairman of the Management Board benefits from the severance agreement described in section 3.2.2.2. of this report.
The members of the Management Board do not receive any compensation other than in accordance with their employment contract.
No member of the Management Board may claim payment of any compensation or indemnity for the termination of his or her position as a Vivendi corporate officer.
Under their respective employment contracts, the members of the Management Board are entiitled, unless terminated for serious misconduct or gross negligence,
to gross indemnification upon departure as follows:
• Mr. Abdeslam Ahizoune (employment contract with the Vivendi Group dated December 2000, as amended on July 8, 2004): 24 months’ fixed salary and
target bonus paid by Vivendi SA and Maroc Telecom, including the amount of contractual indemnification;
• Mr. Philippe Capron (employment contract dated November 16, 2006): no contractual compensation provided;
• Mr. Frank Esser (employment contract dated May 22, 2000, as amended on October 4, 2002): 24 months’ fixed salary and target bonus
in addition to the amount of contractual indemnification;
• Mr. Lucian Grainge (Universal Music Group employment contract dated April 10, 2009): 24 months’ fixed salary and target bonus; and
• Mr. Bertrand Meheut (employment contract dated September 20, 2002): two million euros, including contractual indemnification.
Compensation under a Non-Compete Clause:
No member of the Management Board benefits from this type of indemnification.
3.2.4. Compensation of Group Senior Executives
The aggregate gross amount of the top ten compensation packages paid by Vivendi SA in 2010 was €11.250 million, including benefits in kind. In 2010, the aggregate
gross amount of the top ten compensation packages paid to senior executives for the whole group was €62.302 million, including benefits in kind.
In accordance with Vivendi’s internal governance rules, all senior executives waived their rights to receive directors’ fees as compensation for serving as board
members or permanent representatives within controlled subsidiaries, within the meaning of Article L. 233-16 of the French Commercial Code.
3.3. Grants of Stock Options and Performance Shares
The Management Board, at its meeting held on February 24, 2010, and the Supervisory Board, at its meeting held on February 25, 2010, approved a stock option plan
with performance conditions consisting of 5.3 million shares representing 0.42% of the share capital and an award of 1.08 million performance shares representing
0.08% of the company’s share capital, as detailed below. In 2010, stock options granted to members of the Management Board and its Chairman represented
1.329 million options or 25% of the total grant and 0.107% of the company’s share capital. In 2010, performance shares granted to members of the Management
Board represented 110,745 shares or 10.25% of the total grant and 0.009% of the share capital. Awards granted to the Chairman of the Management Board totaled
360,000 options and 30,000 performance shares, or 5.49% of the total grant of options and performance shares.
As in previous years, the Supervisory Board set the maximum percentage of stock options and performance shares to be granted to the members of the Management
Board at 25% of the total grant, including a maximum of 7.5% to the Chairman of the Management Board. The acquisition of performance shares and stock options
become definitive subject to the satisfaction of certain performance conditions which, since 2009, have included a performance benchmark external to the Group in
accordance with the AFEP and MEDEF recommendations. These performance conditions are weighted as follows: adjusted net income (50%), cash flow from
operations (30%); and the performance of Vivendi shares compared to three trading indices: DJ Stoxx Media, DJ Stoxx Telco and CAC 40 (20%).
The objectives underlying the performance conditions are proposed to the Human Resources committee and are set by the Supervisory Board. The satisfaction of the
objectives is reviewed over two years for performance shares and over one year for stock options.
Method for assessing performance criteria for stock options and performance shares:
Criteria
• Internal indicators (weight: 80%): the Group’s adjusted net income (50%) and operating cash flow (30%).
• External indicators (weight: 20%): the performance of Vivendi’s shares in relation to a basket of trading indices: CAC 40, DJ Stoxx Media and DJ Stoxx
Telco, each weighted one third.
Method
Every year, the Supervisory Board, after a review conducted by the Human Resources Committee, performs a detailed analysis of the budget prospects prepared by
the Management Board and the management committees of each business (prepared in December of the previous year), and sets the limits (threshold, target,
maximum) for the calculation of performance.
108
Calculation
Satisfaction of objectives over two years: performance shares and stock options (previously one year for stock options).
Every year, 50% of shares and options become eligible for vesting and 100% of shares and options are acquired if the weighted average of earnings per criterion is
achieved over two years:
• 100% of shares and options are definitively acquired if the weighted total of the three indicators (adjusted net income, operating cash flow and external
indices) reaches or exceeds 100%;
• 50% are definitively acquired if the weighted total of the three indicators achieves the value relating to the thresholds (50%);
• none is definitively acquired if the weighted total of the three indicators is lower than the value relating to the thresholds (50%);
• arithmetic calculation for intermediate results.
3.3.1. Stock Options Granted
3.3.1.1. Performance Conditions
Since 2008, stock options were granted subject to conditions linked to certain financial indicator targets for the year in which they are awarded. These were the
Group’s adjusted net income and operating cash flow. In addition, for options granted since 2009, the performance of Vivendi shares against three trading indices
(DJ Stoxx Media, DJ Stoxx Telco and CAC 40) is an additional indicator that has been used. All stock options are definitively awarded if the weighted total of the three
indicators reaches or exceeds 100% of the threshold amount set by the Supervisory Board; 50% of the options are vested if the weighted total of the three indicators
achieves the value relating to the threshold amount (50%), and no option is vested if the weighted total of the three indicators is lower than the value relating to the
thresholds (50%).
The stock options vest at the end of a period of three years from the grant dates, subject to the satisfaction of presence and performance conditions as described
above over one year (two years starting in 2011).
Assessment of performance criteria with respect to 2009 and 2010 earnings
The Supervisory Board, at its meetings held on February 25, 2010 and February 28, 2011, after a review conducted by the Human Resources Committee, assessed the
satisfaction in 2009 and 2010 of the internal and external objectives underlying the performance criteria and confirmed an achievement rate above 100.
2009
Weight
Indicators (internal and external)
80%
50%
30%
GROUP objectives (in millions of €)
Adjusted net income (restated NBCU)
Cash Flow from Operations
20%
Stock market performance of indices (2008/2009)
6.67%
6.67%
6.67%
CAC 40
Media index
Telecom index
Weight
Indicators (internal and external)
80%
50%
30%
GROUP objectives (in millions of €)
Adjusted net income
Cash Flow from Operations
Result
Objective (100 %)
Earned
2,319
4,800
2,407
5,237
Vivendi
-29.9%
-29.6%
-29.3%
-33.7%
-33.7%
-33.7%
Objective (100 %)
Earned
2,605
4,490
2,698
5,212
2010
20%
Stock market performance of indices (2010)
(reinvested dividends)
6.67%
6.67%
6.67%
CAC 40
Media index
Telecom index
79.3
60.0
5.3
5.1
5.0
Result
96.5
60.0
Vivendi
+0.4%
+18.0%
+9.8%
+5%
+5%
+5%
13.3
0
0
109
3.3.1.2. Stock option awards to members of the Management Board on April 15, 2010 at an adjusted exercise price of €18.33 per option
– Plan 2010 – 4, exercise period: April 2013 to April 2020 (Table 4 of the AMF recommendations)
Value of the options under the method used for the
consolidated financial statements (in euros)
during the year, as adjusted
770,335
385,168
342,372
479,321
188,306
479,321
2,644,823
387,103
193,552
172,046
240,865
94,626
240,865
1,329,057
Jean-Bernard Lévy
Abdeslam Ahizoune
Philippe Capron
Frank Esser
Lucian Grainge
Bertrand Meheut
Total
The unit value is identical to the value reported in the financial statements in accordance with IFRS, i.e., €1.99 per unit.
Assessment of performance criteria with regard to 2010 earnings
The Supervisory Board, after a review conducted by the Human Resources Committee, noted that the performance criteria set for 2010 were achieved.
The stock options mentioned in the above table were therefore definitively granted.
3.3.1.3. History of Stock Option and Stock Appreciation Right (SAR) Awards to Members of the Management Board (Table 8 of the AMF
Recommendations)
Date of the Shareholders’ Meeting approving option grant
Date of the Supervisory Board meeting
Grant date
Maximum number of options that may be granted under the Shareholders’
Meeting approval
Maximum number of options that may be granted during the year, taking into
account options already granted
Number of SAR granted
Number of options cancelled due to the departure of beneficiaries
Number of SAR cancelled due to the departure of beneficiaries
Total number of options that may be granted at December 31
Number of options granted to members of the Management Board:
Mr. Jean-Bernard Lévy – Chairman
Abdeslam Ahizoune
Philippe Capron
Jacques Espinasse (a)
Frank Esser
Lucian Grainge (b)
Bertrand Meheut
Doug Morris (c)
René Pénisson (d)
Total
Exercise price per stock option and SAR
Expiration date
2010
2009
2008
2007
2006
AGM of
24/04/08
25/02/10
15/04/10
AGM of
24/04/08
26/02/09
16/04/09
AGM of
28/04/05
28/02/08
16/04/08
AGM of
28/04/05
06/03/07
23/04/07
AGM of
28/04/05
28/02/06
13/04/06
30,721,487
29,255,150
29,129,168
28,893,333
28,836,933
10,199,533
5,297,200
39,641
18,972,107
9,712,710
6,561,120
78,000
24,108,367
9,670,883
6,303,200
120,000
29,242,936
9,592,586
5,718,220
1,280,660
75,680
44,280
17,691,840
9,534,861
5,481,520
1,250,320
108,320
16,000
23,322,923
387,103
193,552
172,046
240,865
94,626
240,865
1,329,057
18.33€
15/04/20
387,068
172,031
172,031
240,843
68,813
240,843
120,422
1,402,051
18.62€
16/04/19
387,112
172,050
172,050
240,870
240,870
120,436
240,870
1,574,260
23.37€
16/04/18
387,161
146,261
120,450
146,261
240,900
240,900
120,419
240,900
1,643,252
28.63€/38.45$
23/04/17
387,129
120,441
240,881
240,881
All stock option awards were made below the 0.83% annual threshold of the share capital presented to the Shareholders’ Meeting.
(a)
(b)
(c)
(d)
Member of the Management Board until April 19, 2007.
Member of the Management Board as of April 29, 2010.
Member of the Management Board until November 22, 2008.
Member of the Management Board until April 27, 2009.
240,881
120,428
240,881
1,591,522
26.54€/32.16$
13/04/16
110
3.3.2. Grant of performance shares
3.3.2.1. Performance Conditions
Since 2006, performance shares were granted subject to conditions linked to certain financial indicator targets for the year in which they are awarded. These were the
Group’s adjusted net income and operating cash flow. In addition, for performance shares granted since 2009, the performance of Vivendi shares compared against
three trading indices (DJ Stoxx Media, DJ Stoxx Telco and CAC 40) is an additional indicator that has been used. All performance shares vest and are definitively
awarded if the weighted total of the three indicators reaches or exceeds 100% of the threshold amount set by the Supervisory Board; 50% of the shares are vested if
the weighted total of the three indicators achieves the value relating to the thresholds (50%), and no shares vest if the weighted total of the three indicators is lower
than the value relating to the thresholds (50%).
The performance shares vest at the end of a period of two years from the date of grant (the “Acquisition Period”) subject to the satisfaction of presence
and performance conditions as described above over a period of two years.
The shares must then be retained by the beneficiaries for an additional two-year period following the acquisition date.
In 2010, 429,078 shares were issued at the end of the Acquisition Period in relation to performance shares awarded under the 2008 plans and 29,976 rights
to performance shares were cancelled due to the departure of certain beneficiaries.
3.3.2.2. Performance Share Awards to Members of the Management Board on April 15, 2010 – plan 2010 – 4 – (Table 6 of the AMF
recommendations)
The numbers set forth in the table below relate to the number of performance shares definitively granted. One-half of the 2010 award of performance share award is
therefore definitively granted. The definitive grant of the other half awarded will be reviewed in 2012.
Jean-Bernard Lévy
Abdeslam Ahizoune
Philippe Capron
Frank Esser
Lucian Grainge (a)
Bertrand Meheut
Total
Number of shares
awarded during
the year
Value of shares
under the method
used for consolidated
financial statements
(in euros)
32,255
16,128
14,336
20,070
7,886
20,070
110,745
445,119
222,566
197,837
276,966
108,827
276,966
1,528,281
Vesting date
Date of disposal
Performance
conditions
16/04/12
16/04/12
16/04/12
16/04/12
na
16/04/12
17/04/14
17/04/14
17/04/14
17/04/14
17/04/14
17/04/14
Yes
Yes
Yes
Yes
Yes
Yes
The value used for each Vivendi performance share awarded in 2010 is identical to the value reported in the financial statements, pursuant to IFRS, i.e., €13.80 per unit.
na: not applicable.
(a) Mr. Lucian Grainge is a US tax resident; consequently, the acquisition date is the same as the availability date.
111
3.3.2.3. History of Performance Share and Restricted Stock Unit (RSU) Awards to Members of the Management Board
Date of the Shareholders’ Meeting authorizing the share grant
Date of the Supervisory Board meeting
Grant date
Maximum number of shares that may be granted pursuant to the Shareholders’
Meeting authorization
Maximum number of shares that may be granted during the year based on
allotments already made
Total number of shares granted in April
Total number of RSU granted in April
Number of shares cancelled due to the departure of beneficiaries
Number of RSU cancelled due to the departure of beneficiaries
Total number of shares that may be granted as of December 31
Number of shares granted to members of the Management Board :
Jean-Bernard Lévy – Chairman
Abdeslam Ahizoune
Philippe Capron
Jacques Espinasse
Frank Esser
Lucian Grainge
Bertrand Meheut
Doug Morris
René Pénisson
Total
Vesting date
Date of disposal
2010
(adjusted)
2009
(adjusted)
2008
2007
2006
AGM of
24/04/08
25/02/10
15/04/10
AGM of
24/04/08
26/02/09
16/04/09
AGM of
28/04/05
28/02/08
16/04/08
AGM of
28/04/05
06/03/07
23/04/07
AGM of
28/04/05
28/02/06
13/04/06
6,144,297
5,851,030
5,825,833
5,785,169
5,767,387
5,572,960
1,084,172
None
13,223
4,514,175
5,850,030
567,001
None
6,602
5,572,960
4,506,989
525,496
None
10,208
5,849,987
4,951,844
476,717
106,778
5,180
3,692
4,504,872
5,767,387
456,968
104,250
11,700
1,334
4,967,909
32,255
16,128
14,336
20,070
7,886
20,070
110,745
16/04/12
17/04/14
32,268
14,342
14,342
20,079
5,738
20,079
31,552
138,400
18/04/11
19/04/13
30,000
13,334
13,334
18,667
18,667
9,334
18,667
122,003
17/04/10
19/04/12
30,000
11,334
9,334
11,334
18,667
18,667
9,334
18,667
127,337
24/04/09
24/04/11
30,000
9,334
18,667
18,667
18,667
9,334
18,667
123,336
14/04/08
14/04/10
All performance share awards were made below the 0.17% annual threshold as presented to the Shareholders’ Meeting.
3.3.2.4. Performance Shares that became available in 2010 (Information required pursuant to Table 7 of the AMF Recommendations)
Performance shares that became available for each Management Board Member
Jean-Bernard Lévy
Abdeslam Ahizoune
Philippe Capron
Frank Esser
Lucian Grainge
Bertrand Meheut
Plan No. and date
2006/04 -1
13/04/2006
2006/04 -1
13/04/2006
2006/04 -1
13/04/2006
2006/04 -1
13/04/2006
Number of shares
that became available
during the year
Acquisition
conditions (3)
30,000
yes
9,334
yes
18,667
yes
18,667
yes
3.3.3. Options Exercised in 2010 by Corporate Officers (Information required pursuant to Table 5 of the AMF
recommendations)
In 2010, Jean-Bernard Lévy, Chairman of the Management Board, exercised 193,641 stock options at a unit price of €16.781 (plan No. 2003/01).
1. Exercise price plus an additional €2 due to the commitment taken by Mr. Jean-Bernard Lévy at the time Vivendi filed its application for the consolidated profit tax system under French law at the request of the
French Minister for Economy, Finance and Industry.
112
3.3.4. Major option awards and Options Exercised in 2010 (Information required pursuant to Table 9 of the AMF
Recommendations)
Ten senior executives and other employees of the Group, who are not directors, received an aggregate of 980,666 stock options representing 18.51% of the total
number of options awarded in 2010 and 0.08% of the share capital as of December 31, 2010.
The adjusted exercise price per share underlying these stock options is €18.33.
Ten senior executives and other employees of the Group, who are not corporate officers, exercised a total of 138,907 stock options at a weighted average price
per share of €14.78.
3.3.5. New provisions implemented in 2011
Starting in 2011, the Supervisory Board, upon the proposal of the Human Resources Committee, established the following principles:
• Increased weight of external indicators: 30% (Stoxx Europe 600 Telecommunications index: 60% and a Media index composed of a representative panel
of companies involved in the media, video games and music sectors: 40%);
• Weight of internal indicators: 70% (adjusted net income: 45% and cash flow: 25%);
• Changes in distribution ratio of stock options to performance shares (approximately 796 beneficiaries throughout the group):
50/50 (compared to 80/20) for Management Board members and the senior executives of the group (32 beneficiaries);
20/80 (compared to (50/50) for key managers; for both of these categories, it was decided to grant one performance share for every 3.6 stock options
(a 20% lower ratio compared to previous years);
100% performance shares, with a maximum number of 850 performance shares, to be granted to certain expert high-potential managers (approximately
200 beneficiaries);
• Alignment of the assessment period for stock option performance criteria with performance share criteria, i.e., two years (compared to one year,
which was the case previously); and
• Hedging of annual performance share plans through the repurchase by Vivendi of its own shares pursuant to the on-going share repurchase program
authorized by the general shareholders’ meeting of April 29, 2010.
3.3.6. Conditions under which Corporate Officers Hold Shares Pursuant to the Exercise of Stock Options and Grants of
Performance Shares
Pursuant to Articles L. 225-185 and L. 225-197-1 of the French Commercial Code, the Supervisory Board, at its meeting held on March 6, 2007, established rules for the
members of the Management Board in relation to the retention of both shares obtained from the exercise of stock options and performance shares awarded since 2007.
Members of the Management Board must hold in a registered account a number of shares obtained pursuant to the exercise of stock options and performance shares
granted since the implementation of the 2007 plan equal to at least 20% of the net acquisition value generated each year, if any, from the date of exercise of the
options or sale of the performance shares, until the end of their term of office.
3.3.7. Conditions Specific to Vivendi
Moreover, since January 1, 2007, the Chairman of the Management Board, the members of the Management Board, and the General Management and the senior
executives of the business units (32 beneficiaries) must, within a period of five years, set up a portfolio of Vivendi shares relating respectively to three years, two years
and one year of gross compensation (fixed compensation and target bonus) and they must hold them continuously until the end of their office. In December 2010, the
Supervisory Board reported on the application of this program and noted that it was being properly implemented.
3.4. Trading in Company Securities
Vivendi complies with the General Regulations of the AMF and the recommendations of the AFEP and MEDEF and therefore purchase and sale transactions involving
company securities or financial instruments are prohibited during the period from the date on which a member of the Supervisory Board or the Management Board
becomes aware of precise market information concerning the company’s day-to-day business or prospects which, if made public, would be likely to have a material
impact on the company’s share price, up to the date on which this information is made public. In addition, such transactions are also prohibited for a period of 30
calendar days preceding and including the day of publication of the company’s quarterly, half-yearly and annual consolidated financial statements.
Vivendi distributes a schedule setting out the periods during which transactions involving company shares are prohibited (“blackout periods”). This schedule also
indicates that the periods mentioned do not preclude the existence of other blackout periods that may apply due to the awareness of precise market information
concerning the day-to-day business or prospects of Vivendi or one of its listed subsidiaries which, if made public, would be likely to have a material impact on the
company’s share price.
Finally, pursuant to AFEP and MEDEF recommendations published on January 9, 2007, Vivendi’s Management Board, at its meeting held on January 24, 2007,
prohibited the use of any and all hedge transactions on company securities following the exercise of stock options.
113
3.4.1. Trading in securities conducted by corporate officers
Pursuant to Article 223-26 of the General Regulations of the AMF, the table below sets out transactions performed by directors involving the company’s securities in 2010
up through the date of registration of the official French version of this Annual Report (Document de Référence) that were notified to the Company and to the AMF:
Purchase
Full Name
Claude Bébéar
Daniel Camus
Maureen Chiquet
Dominique Hériard Dubreuil
Aliza Jabès
Christophe de Margerie
Pierre Rodocanachi
Jacqueline Tammenoms Bakker
Lucian Grainge
Sale
Date
Quantity
Unit price
(in euros)
10/03/10
17/12/10
02/03/10
15/01/10
24/09/10
879
1,500
1,000
1,000
2,200
19.31
20,755
20.27
21.16
19.68
23/06/10
02/03/11
03/03/11
04/03/11
1,500
200
200
400
17.4317
20.1025
20.0300
20.0125
01/07/10
12/10/10
24/01/11
25/01/11
25/01/11
04/03/11
04/03/11
18/01/10
12/03/10
11/10/10
14/06/10
07/03/11
16/03/10
1,000
300
600
550
50
2,450
50
2,500
2,200
5,000
2,850
2,500
10,000
16.45
19.90
21.975
21.85
21.85
20.17
20.24
20.04
19.5702
20.362
17.43
19.85
19.0529
Jean-Bernard Lévy
None
Date
Quantity
Unit price
(in euros)
None
None
None
None
None
None
None
None
None
(a) 3/09/10
(a) 6/09/10
(a) 7/09/10
64,547
64,547
64,547
19.414
19.355
19.30
(a) Sale of shares following the exercise of stock options (plan 2003-01) (see paragraph 3.3.3.)
3.5. Compliance Program
The objective of the Compliance Program is to make employees aware of their professional responsibilities and to provide them with a guide to which they can refer
and that will assist them in determining the most appropriate conduct.
It establishes rules of conduct based on general principles of international law (OECD, ILO and European law) as well as prevailing legislation in various countries
(mainly France and the United States).
It sets forth the general ethical rules applicable within the Group. These general rules are applied in each operational business unit in all territories where the group
is present to address the specificities of subsidiary activities as well as the particularities of local legislation.
At its meeting held on March 16, 2004, the Board of Directors of Vivendi, upon recommendation of its Audit Committee, approved a Financial Code of Ethics. This code was
maintained following the company’s change of organizational structure. It applies to the senior executives of Vivendi SA responsible for communications and financial and
accounting reporting.
The legal department of the company and Compliance Officers of the business units work to ensure the overall consistency by coordinating with the General Counsel’s
office. An annual progress report is prepared and presented to the Audit Committee, which then reports to the Supervisory Board.
114
3.5.1. Reasons for the Program
The Compliance Program addresses the following main issues:
• the new national and international standards under which companies must report on how they comply with their economic and social responsibilities; and
• the introduction of new rating criteria aimed at assessing the policies that companies have set up to assume this responsibility.
3.5.2. Objectives
The Compliance Program has two major purposes:
• to raise the awareness of the Group’s employees and to provide them with a reference tool which gives them guidance, as necessary, in determining appropriate courses
of action; and
• to reduce the risks of triggering civil and criminal liability by both the Group’s employees and companies.
3.6. Financial Information and Communication Procedures Committee
This Committee, set up in 2002, is responsible for the regular assessment of the company’s procedures for preparing and publishing financial data and for reviewing
financial information which is published quarterly.
3.6.1. Composition
The Committee Members are appointed by the Chairman of the Management Board. At a minimum, the Committee is comprised of those Vivendi executives holding the
following positions:
• the General Counsel (Chairman of the Committee);
• the Group’s Chief Financial Officer, member of the Management Board;
• the Executive Vice President, Communications;
• the Deputy Chief Financial Officers;
• the Senior Vice President, Audit and Special Projects;
• the Executive Vice President, Investor Relations; and
• the Senior Vice President, Head of the Legal Department.
Members of the Committee may appoint additional members as their substitutes, who are executives from the aforementioned departments. The Committee is
currently comprised of 15 regular attendees.
3.6.2. Powers
The Committee assists the Chairman of the Management Board and the Group’s Chief Financial Officer in ensuring that Vivendi fulfills its disclosure requirements with
respect to investors, the public and the regulatory and market authorities, in particular the Autorité des Marchés Financiers (AMF) and Euronext Paris in France.
In performing its duties and objectives, the Committee ensures that Vivendi has set up adequate controls and procedures so that:
• any financial information that must be disclosed to investors, the public or the regulatory authorities is reported within the deadlines set forth by applicable
laws and regulations;
• all corporate communications are subject to appropriate verification in accordance with the procedures set up by the Committee;
• all information requiring a release to investors and/or appearing in the documents recorded or filed with any regulatory authority is communicated to the
company’s senior management, including the Chairman of the Management Board and the Group’s Chief Financial Officer, prior to release so that decisions
regarding such information can be made in a timely manner;
• oversight is provided to assess Vivendi’s procedures and those of the business units for controlling information as well as over internal control procedures,
under the supervision of the Chairman of the Management Board and the Group’s Chief Financial Officer;
• the Chairman of the Management Board and the Group’s Chief Financial Officer are advised of any major procedural issues about which the Committee
should be informed and which are likely to affect Vivendi’s procedures for controlling information and its internal control procedures. The Committee
issues recommendations, where necessary, for changes to be made to these controls and procedures. The Committee monitors the implementation of
changes approved by the Chairman of the Management Board and the Group’s Chief Financial Officer; and
• more generally, the Chairman of the Management Board and the Group’s Chief Financial Officer are assured that they will receive all information they may request.
115
3.6.3. Activity in 2010
The Committee meets at the request of the Chairman of the Management Board, the Chief Financial Officer, the Committee Chairman or of one of its members. Meetings
are held at least every quarter in accordance with the schedule for releasing financial information on the Group’s results and before each Audit Committee meeting.
In 2010, the Committee met seven times. Its proceedings primarily involved the review of:
•
•
•
•
•
the annual and half-year certification letters signed by the Chairman and Chief Financial Officer of each of the Group’s business units;
progress questionnaires for assessing internal controls within the Business Units;
the financial information published in the annual, half-year and quarterly financial reports and published in the Annual Report;
the Sustainable Development report; and
the business report and the environmental and employee data report.
The Committee reports to the Chairman of the Management Board and to the Audit Committee, as necessary.
3.7. Risks Committee
The Risks Committee was set up in January 2007. Its purpose is to make recommendations or issue opinions to the Management Board in the following areas:
• the identification and assessment of potential risks that may arise from operations performed within the Vivendi group;
• the review of the adequacy of risk coverage and the level of residual risk;
• the formulation of recommendations with a view to improving risk coverage;
• the review of insurance programs; and
• the list of risk factors and forward-looking statements as disclosed in the documents published by the Company.
3.7.1. Composition
The Committee is chaired by the Chairman of Vivendi’s Management Board. It is comprised of at least four members including its Chairman, and:
• the Group’s Chief Financial Officer, member of the Management Board;
• the General Counsel; and
• the Director of Internal Audit and Special Projects.
3.7.2. Powers
The Committee aims to promote the exchange of best practices within the Group within the area of risk prevention and management and to provide support
to subsidiaries in their ongoing efforts to improve risk management. This objective is dependent upon designated contacts within the business units who are
responsible for implementing the risk prevention policy and for monitoring the progress of preventive or corrective action plans.
The Risks Committee passes on its principal conclusions and recommendations to the Audit Committee of Vivendi’s Supervisory Board.
3.7.3. Activity in 2010
In 2010, this committee met three times and once during the first quarter of 2011. Its works primarily focused on:
• the review of risk mapping for SFR, Groupe Canal+, Maroc Telecom and GVT;
• Revenue Assurance programs at SFR, Groupe Canal+, Maroc Telecom and GVT; and
• fraud prevention and risk management programs in each of the group’s six businesses.
3.8. General Management
Chairman of the Management Board, Chairman of Activision Blizzard and Chairman of GVT Holding SA
Member of the Management Board and Chief Financial Officer
Senior Executive Vice President, General Counsel and Secretary of the Management and Supervisory Boards
Senior Executive Vice President, Human Resources
Senior Executive Vice President, Strategy and Development
Senior Executive Vice President, Communications and Sustainable Development
Director of Innovation and Deputy Chief Financial Officer
Jean-Bernard Lévy
Philippe Capron
Jean-François Dubos
Stéphane Roussel
Régis Turrini
Simon Gillham
Sandrine Dufour
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Section 4 Report by the Chairman of the Vivendi Supervisory Board
on Corporate Governance, Internal Audits and Risk
This report will be presented at the General Meeting of Vivendi shareholders to be held on April 21, 2011, pursuant to Article L.225-68 of the French Commercial
Code and the joint recommendations of the AFEP and the MEDEF published in the Corporate Governance Code for publicly traded companies. It was prepared with
the support of the General Management, the General Counsel and the Internal Audit and Special Projects Department and was presented to the Audit Committee
prior to its approval by the Supervisory Board on February 28, 2011.
Since 2005, Vivendi has been operating as a French corporation (société anonyme) with a two-tier structure made up of a Management Board and a Supervisory
Board. As a result, the functions of management and control are segregated, allowing the principal officers of the company’s business units to be fully incorporated
into the Group’s administration and management.
In addition, throughout the year, as part of rigorous internal review procedures implemented by the company’s Management Committees, the Group’s principal
business units present the following to their respective management teams: an analysis of their operational and strategic positioning; their target figures as
established during the preparation and actualization of the budgets and their action plans and topics of significant interest.
The Consolidated Code of AFEP and MEDEF recommendations constitutes the corporate governance code to which Vivendi voluntarily adheres in its preparation
of this report.
4.1. Corporate Governance
4.1.1. Conditions Governing the Preparation and Organization of the Work of the Supervisory Board
The composition as well as the conditions governing the preparation and organization of the work of the Supervisory Board and its Committees is presented in
Chapter 3, sections 3.1.1.2 to 3.1.1.14 of this Annual Report.
4.1.2. Determination of deferred compensation and benefits granted to the members of the Management Board
and its Chairman
The Supervisory Board resolved to apply all the AFEP and MEDEF recommendations in relation to the compensation for directors and corporate officers of listed
companies, following the proposal of the Corporate Governance and Nominating Committee and the Human Resources Committee.
Compensation of members of the Management Board and of the senior managers of the company is set by the Supervisory Board based on input received from the
Human Resources Committee. In this context, the Human Resources Committee relies on comparative studies performed by external and independent advisers that
take into account the compensation of company officers in a range of French, European and international companies which operate in business sectors identical or
similar to those of Vivendi and its subsidiaries. The compensation of Management Board members is comprised of a fixed and a variable component which is subject
to the satisfaction of certain performance conditions.
In February 2010, the Vivendi Supervisory Board resolved to incorporate sustainable development and social responsibility criteria into the variable compensation of the
members of the Management Board and the senior executives of the group. Criteria that are relevant, measurable and verifiable by a specialized firm were defined for
each business unit based on their respective skills and positioning. Accordingly, it is necessary to measure, in the calculation of bonuses for the persons in question, their
individual contribution to the sustainable development strategies for the group, such as the protection and empowerment of young people in its media practices, the
promotion of cultural diversity and the reduction of the digital divide. Vivendi is one of the first companies in the CAC 40 to incorporate performance objectives linked to
social responsibility into the variable compensation of its executives. The extra-financial ratings agency Vigeo is assisting the group with the assessment of its strategies.
All principles and rules established by the Supervisory Board concerning deferred compensation and benefits of the members of the Management Board, its Chairman
and the corporate officers of the principal group subsidiaries are given in Chapter 3, sections 3.2, 3.3 of this Annual Report.
The new criteria related to the award of stock options and performance shares, which were implemented starting in 2011, are presented in section 3.3.5. of Chapter 3
of this Annual Report.
4.1.3. Holding Periods for Shares Obtained upon the Exercise of Stock Options and for Performance Shares held by Board
Members and Corporate Officers
These conditions are given in Chapter 3, section 3.3.6 of this Annual Report.
4.1.4. Terms and Conditions Governing Shareholders’ Attendance at General Meetings
Each shareholder is entitled to a number of votes equal to the number of shares he/she owns or represents.
The terms and conditions governing shareholders’ attendance at general meetings are given in Chapter 3, section 2.1.4 of this Annual Report.
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Vivendi Report by the Chairman of the Supervisory Board
4.2. Internal control procedures
Vivendi strives to maintain the highest standards of internal control and financial disclosure. To this end, the Financial Information and Communication Procedures
Committee meets on a regular basis. A Risks Committee chaired by the Chairman of the Management Board is responsible for strengthening management and risk
prevention measures within the Group.
4.2.1. Definition and Objectives of Internal Control
The company views internal control as a set of procedures established by Vivendi’s Management Board and implemented by its employees to ensure that the
following objectives are achieved:
• the implementation of the guidelines and strategies established by the Management Board;
• compliance with laws, regulations and the Group’s corporate values;
• the prevention and control of operational and financial risks as well as the risks of fraud and error;
• the optimization of internal processes to ensure the effectiveness of operations and the efficient use of resources; and
• the completeness and accuracy of accounting and financial disclosure information as well as management information.
In order to achieve each of these objectives, Vivendi has set out and implemented general principles of internal control based to a large degree on the framework
established by the report of the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) published in 1992, the reference framework of
internal control process and the recommendations published by the Autorité des Marchés Financiers (“AMF”).
These principles are based upon:
• a policy that contributes to the development of a culture of internal control and integrity principles;
• the identification and analysis of risk factors that may adversely impact the achievement of the Group’s objectives;
• a system to support the implementation of the goals set by the Management Board;
• the periodic review of control measures and the continuing search for areas of improvement; and
• the process of distributing information relating to internal control.
However, as with any system of control, these principles, when applied, may not provide an absolute guarantee that all risks will be fully eliminated or controlled.
4.2.2. Scope of Internal Control
Vivendi is organized into six business units (Activision Blizzard, Universal Music Group, SFR, Maroc Telecom, GVT and Groupe Canal+) and holding activities. Each
of them must implement the strategies determined by the Management Board, including objectives in the area of internal control. Each entity has a set of tailored
internal control measures which include both the implementation of the Group’s procedures and the definition and implementation of procedures specific to each
of the business units according to its organization, culture, identified risk factors and operational specificities. As the parent company, Vivendi ensures that such
internal control measures exist and are adequate, in particular with respect to the accounting and financial procedures applied by the entities of the Group that
are fully consolidated.
GVT has its own internal control procedures and, in 2010, incorporated the key Vivendi procedures into its system. Activision Blizzard, a US company whose shares
are listed on the NASDAQ, also has its own internal control system.
4.2.3. Internal Control Components
4.2.3.1. Control Environment
Rules of conduct and ethics applicable to all employees
Vivendi ensures that all aspects of its corporate responsibility are taken into account. Vivendi has therefore adopted a charter of the Group’s values which includes
consumer focus, creativity, ethics and social responsibility.
There is also a Compliance Program which contains general rules of ethics applicable to all the employees of the Group regardless of their seniority and position.
These rules, available at www.vivendi.com, cover the following areas: employees’ rights, integrity and protection of information, prevention of conflicts of interest,
commercial and financial ethics, protection of the Group’s assets and resources and respect of the environment.
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The Compliance Program has three major purposes:
• raising the awareness of group’s employees and to provide them with a reference tool which gives them guidance in determining appropriate
courses of action;
• reducing the risks of triggering civil and criminal liability by both the Group’s employees and companies; and
• discussing a cross-disciplinary theme each year in depth. For this purpose, over the past three years, conflicts of interest, the protection of personal
data and the preservation of tangible and intangible data have all been reviewed.
The implementation of the Compliance Program addresses:
• the new national and international standards under which companies must report on how they comply with their economic and social responsibilities; and
• the introduction of new rating criteria aimed at assessing the policies that companies have set up to assume this responsibility.
It establishes rules of conduct based on general principles of international law (OECD, ILO and European law) as well as prevailing legislation in various countries
(mainly France and common law countries).
These general rules are applied in each operational business unit in all territories where the group is present to address the specificities of a subsidiary’s operations
as well as the particularities of local legislation. In this way, each business unit has established an additional code of ethics.
The consistency of the whole program is ensured by the legal teams and Compliance Officers of the principal business units, which is coordinated by the headquarters’
General Counsel. An annual activity report prepared by Vivendi’s General Counsel is sent to the Audit Committee which provides a report on it to the Supervisory Board.
The protection of personal data remains a major issue for Vivendi. Accordingly, the general counsels of the various business units of the Group met in late November
2010 to review in advance the revision announced, in a statement by the European Commission, of the Directive of October 24, 1995 to update the data and content
protection charters and the good practices guide for the protection of sensitive data within the Group.
Responsibilities and commitments of the General Management of each business unit
The Chairman and Chief Financial Officer of each business unit is asked to sign a representation letter every six months certifying compliance with internal control
procedures relating to the preparation of financial statements and financial, industry-based and operational information items to insure the accuracy, integrity and
reliability of financial disclosure.
Upon proposal of the Audit Committee, Vivendi has established a code of financial ethics This code was maintained following the company’s change of organizational
structure. It applies to the senior executives of Vivendi SA responsible for communication as well as financial and accounting reporting.
Rules on market ethics
Blackout periods are the subject of individual reminders sent via email where necessary and, in any event, before each financial reporting period identified.
Delegation of powers
The delegation of operational powers, whether on a single occasion or on a recurring basis, is one of the responsibilities of the General Management of Vivendi and
of the General Management of each of its business units. These delegated powers are updated and formalized on a regular basis according to the evolving role and
responsibilities of the relevant delegate.
Resources dedicated to the definition of internal control procedures
Vivendi and each of its business units have set up a team in charge of establishing internal control procedures.
4.3. Risk Monitoring and Management
Vivendi’s Risks Committee is in charge of identifying and managing risks likely to affect the fulfillment of the Group’s objectives. It is chaired by the Chairman of the
Management Board and includes as permanent members: the Chief Financial Officer, the General Counsel, and the Internal Audit Director. The business units are
invited to attend meetings depending on the agenda. The Committee provides its principal conclusions and recommendations to the Audit Committee of the
Supervisory Board at each of its meetings.
The Risks Committee is responsible for making recommendations to the Management Board in the following areas:
• the identification and assessment of risks that may arise from the conduct of operations within the Vivendi group, including risks relating to tax,
employment and environmental matters, risks in terms of compliance with laws and regulations, risks relating to ethics, competition and conflicts
of interest and risks associated with the security of information systems;
• the review of the adequacy of risk coverage and the level of residual risk;
• the review of insurable risks and of insurance programs; and
• the list of risk factors and forward-looking statements as publicly disclosed by the Group.
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The assessment of the risks at the Group level is based on a qualitative and quantitative approach taking into account its contribution to the Group’s principal
financial benchmarks.
In 2010, this Committee met three times and, as of the date of this Annual Report, once during the first quarter of 2011. The main topics addressed were:
• the review of risk mapping for SFR, Groupe Canal+, Maroc Telecom and GVT;
• the Revenue Assurance programs at SFR, Groupe Canal+, Maroc Telecom and GVT; and
• the measures for preventing and managing the risk of fraud.
The major risks faced by the company are described in Chapter 2 of this Annual Report, in the risk factors section, and in Note 23 to the Consolidated Financial
Statements for the year ended December 31, 2010 relating to risk management and financial derivative instruments. The General Counsel’s office provides
for the prevention and management of risks related to ethics, competition and conflicts of interest. The management of financial risks (liquidity, interest and
exchange rates) is monitored by Vivendi’s Finance and Treasury Department through a centralized organization at the corporate headquarters.
Operational risks are primarily managed by the business units which implement risk management procedures that are adapted to fit their specific operations
(e.g., risks associated with the infringement of intellectual property rights for the music business; risks associated with piracy and counterfeiting for the film
and music businesses).
Coverage of insurable risks (damage and operating losses from a disaster, third-party liabilities) is monitored by the Risk Management Department of Vivendi
in collaboration with the Finance and Legal Departments. Current insurance programs are described in Chapter 2 of this Annual Report.
The Risks Committee promotes the exchange of best practices within the Group in the areas of risk prevention and management and supports business units
through their on-going improvement efforts.
In 2010, all the documentation presented to the Risks Committee was also presented to the Statutory Auditors of the company. In addition, the Statutory Auditors
receive, at each meeting of the Audit Committee, the report of the work performed by the Risks Committee.
4.3.1. Control Activities
Control activities are primarily performed by the functional and operational management teams in accordance with existing reference procedures.
The following bodies ensure the monitoring of internal control measures that are implemented under the responsibility of Vivendi’s Management Board.
The Audit Committee
The Audit Committee is comprised of a majority of independent members of the Supervisory Board. Within the powers conferred to it, the Audit Committee
prepares the decisions of the Supervisory Board and provides recommendations or issues opinions to it on a range of different matters, including:
• the review of the annual and half-year consolidated financial reports and the annual unconsolidated financial statements of the company,
prepared by the Management Board;
• the monitoring of the company’s cash and alerting the board to potential issues relating thereto;
• the review of the assessment and coverage of operational and financial risks, and of insurance programs;
• the appointment of external auditors and fees to be paid to them;
• the application of accounting methods and principles, the scope of the company’s consolidation, risks and off-balance sheet commitments;
• the monitoring of the consistency and effectiveness of internal control measures, the review of this Report;
• the review of material internal control weaknesses and, when applicable, the review of corruption and fraud cases;
• the review of ethics compliance; and
• the annual review of the Compliance Program, the proposal of any measure likely to improve its effectiveness, and, if necessary, the formulation
of an opinion on its review.
A report is regularly presented by its Chairman to the Vivendi Supervisory Board and sent to every member of the Committee and the Supervisory Board.
Vivendi chairs the Audit Committees of the following subsidiaries: SFR, Maroc Telecom, GVT, Canal+ France and Universal Music Group, and participates,
subject to the agenda, in meetings of Activision Blizzard’s Audit Committee.
In 2010, the Vivendi Audit Committee met three times with a 100% attendance rate. Its work is presented in section 3.1.1.14 of the Annual Report.
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The Internal Audit and Special Projects Department
The Internal Audit and Special Projects Department (made up of 18 auditors for financial audit and external auditors for IT audits) reports to the Chairman of the
Management Board and is responsible for assessing, in an independent manner, the quality of internal controls at every level of the organization. Its operations are
governed by a Charter approved by the Audit Committee.
The Internal Audit Department of SFR (11 Auditors), Canal+ France (7 auditors), Activision Blizzard (6 auditors), GVT (5 auditors) and Maroc Telecom’s Financial Audit
Department (9 Auditors) currently reinforce the resources dedicated to internal control assessment at the business units level. The annual audit plan approved by the
Management Board provides that on average 39% of the missions will be conducted jointly by the business units and the headquarters respective auditing teams.
The Internal Audit Department is responsible for performing an independent assessment of the effectiveness of the internal control processes, based on an annual
audit plan which is approved by the Management Board, the Finance department and the office of the General Counsel of the Group and presented to the Audit
Committee. This plan is developed from both an independent analysis of the operational, IT and financial risks of each business unit and the consultation with the
General Management of each entity. Reports on the audit work carried out are communicated to Vivendi’s General Management, and to operational and functional
management and their superiors. A summary of these reports is presented at each Audit Committee meeting along with any observations made by the Group’s
external auditors. Follow-up audits are generally performed within twelve months to ensure that recommended action plans and agreed corrective measures have
been implemented. A quarterly report is presented to the Management Board and the Supervisory Board.
In connection with its operations, the Group may encounter cases of fraud which are systematically reported to the Audit Committee and which may be the subject
of special investigations and of penalties where applicable.
Self-assessment questionnaires
A self-assessment questionnaire on internal control containing approximately 40 questions and dealing with the five main components of internal control as defined
by the COSO report is sent out jointly by the General Counsel’s office and the Financial Department every year. This questionnaire covers the following topics:
• ethics and human resources: the existence and dissemination of a specific code of ethics, reference checking procedures upon hiring, procedures
for granting exceptions to the Compliance Program, measures for protecting personal data;
• financial reporting: the dissemination of group procedures, particularly accounting procedures and the systematic referral to the Vivendi financial
consolidation and reporting team of specific accounting adjustments;
• organizational: the regular update of powers of attorney and the review of the principles of separation of tasks, procedures for the assessment
and monitoring of risks of the business lines and the existence and update of a backup and continuity plan;
• information technologies: computer security procedures and regular data backup; and
• control and monitoring activities: description of the resources allocated to internal control, closing accounts and budget monitoring.
A certain number of initiatives have been put forward, such as the continued adaptation of the control environment of the units recently incorporated into the group,
strengthened documentation of processes and periodic updates of delegations of powers within subsidiaries, the establishment of audit committees in all operational
subsidiaries of the group and the updating of data protection charters and guides.
A summary of the answers to these questionnaires is presented and reviewed by the Group’s Financial Information and Communication Procedures Committee.
The documentation containing the answers to the questionnaires and the conclusions relating thereto are also reviewed by the business units’ external auditors.
Financial Information and Communication Procedures Committee
This Committee assists the Chairman of the Management Board and the Chief Financial Officer in their task of ensuring that Vivendi fulfills its obligations with regard
to the disclosure of information to investors, the public and the regulatory and market authorities in France. It is chaired by the General Counsel and is comprised of
representatives from the company’s operational departments. Seven meetings of this committee were held in 2010.
The disclosure of information within the scope of the Committees work includes documents containing periodic information distributed to investors and to financial
markets in compliance with French financial market regulations, press releases related to the quarterly financial results and documents used in presentations to
investors and financial analysts.
4.3.2. Internal Control Monitoring
The policy of formalizing and assessing internal control is implemented by dedicated teams within each business unit. These units report on the progress of action
plans developed in conjunction with the Vivendi Auditing and Special Projects Department, which in turn reports to the General Management of each business unit.
The work performed by the Statutory Auditors in relation to the review and assessment of internal control is summarized in a detailed presentation to the General
Management of the business units concerned. A summary of their conclusions is presented to Vivendi’s Audit Committee.
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4.4. Key Processes for Financial and Accounting Information
The processes listed below help reinforce internal controls concerning the treatment of financial and accounting information disclosed by Vivendi. The provisions
of a guide on applying internal control procedures in relation to financial disclosures contained in internal control reference materials published by the AMF were
taken into account during the update of these procedures.
• Consolidation and financial reports: the consolidated financial statements of the Group and its financial reporting are prepared in accordance with
international accounting standards (IFRS) based on accounting data prepared under the responsibility of management for each business unit. The IFRS
standards and the IFRIC interpretations used are those adopted by the European Union with a mandatory application as of December 31, 2010. The main
topics addressed in the financial report must comply with specific requirements. These requirements include, in particular, an impairment test on assets
held by the company during the fourth quarter of each fiscal year, an assessment of the liquidity risk, the valuation of employee benefits, duties and taxes
(see below) and off-balance sheet commitments. The consolidated financial statements are closed by the Management Board quarterly. The annual and
half-year financial statements are reviewed by the Supervisory Board, in reliance on the observations of the Audit Committee. The Group’s consolidated
financial statements are published quarterly. They are subject to an annual audit and limited semi-annual reviews by the Group’s Statutory Auditors.
• Budget and management control: every year, each business unit must present its strategy and its annual budget for the following year to the Group’s
General Management. Following approval by Vivendi’s Management Board, a summary is then presented to the Supervisory Board. Quantitative and
qualitative targets used as a basis to assess performance are then set for each business unit’s management in the context of priority actions which are
monitored on a monthly basis and checked annually. These budgets are reviewed each month and updated three times a year and are subject to a specific
reporting process.
• Investments/divestments: all investment and divestment transactions exceeding €15 million must receive prior approval from the Investment Committee
chaired by the Chairman of the Management Board. This procedure applies to all equity transactions (including the acquisition of equity interests and the
launch of new businesses) and to any other financial commitment (including the purchase of rights and property contracts) that was not provided for in the
annual budget. The Investment Committee meets as often as necessary. The analysis, documents and reports are prepared by the Group’s Strategy and
Development Department. Any transaction involving amounts greater than €100 million and €300 million must receive prior approval of the Management
Board and the Supervisory Board, respectively, pursuant to their Internal Regulations. In the case of Activision Blizzard, whose rules of governance are
defined in its by-laws, any investment decision involving a sum greater than US$30 million not provided for in the budget must be approved by its Board
of Directors, consisting of a majority of members appointed by Vivendi.
• Follow-up of investment transactions: in connection with the regular follow-up of value creation, Vivendi’s Management Board strengthened the process of
reviewing the “ex post” integration of investment operations, supplementing the existing budgetary reviews and quarterly financial reporting. The analysis
aims to validate the implementation of controls and initiatives as well as the actual financial performance pursuant to the business plan which was
approved for the acquisition. It takes into account both the progressive integration of companies acquired by the business units and the impact of changing
market conditions following the acquisition date. Conclusions are reviewed by Vivendi’s Internal Audit Department and presented to Vivendi’s General
Management and, for major issues, to the Management Board.
• Monitoring of financial commitments: as part of the financial reporting process, the business units compile an inventory of the commitments given
and received on a quarterly basis. These commitments are presented by the business units’ legal and finance officers at meetings held with Vivendi’s
Management which take place as part of the annual financial statements’ closing process.
• Sureties, endorsements and guarantees: pursuant to the provisions of the company’s by-laws and the Internal Regulations of the Supervisory Board,
the granting of sureties, endorsements and guarantees by the company to its subsidiaries is subject to prior approval in accordance with the following
dual limitations:
any commitment under €100 million where the cumulative amount of commitments is under €1 billion is subject to the approval of the Management
Board which may delegate such power. The approval decision requires the signatures of both the Chief Financial Officer and the General Counsel; and
any commitment over €100 million and any commitment, regardless of the amount, where the cumulative amount of commitments is over €1 billion
are subject to the approval of the Supervisory Board. The approval decision requires the Chairman of the Management Board’s signature.
• Treasury, financing and liquidity: the management of cash flows and hedging transactions (including foreign exchange and interest rates) is centralized
at the headquarters of Vivendi SA. SFR and Maroc Telecom’s treasury functions are managed independently in compliance with the Group’s policies
and procedures. At Activision Blizzard, a cash management agreement defines the services to be performed by the company on behalf and under the
responsibility of Activision Blizzard. Liquidity position at the business unit level, as well as exposure to foreign exchange and interest rate risks are
monitored on a bi-monthly basis by a finance committee. The majority of short and long-term financing activities take place at the head office and are
subject to the prior approval of the Management Board and Supervisory Board, in accordance with the provisions of their Internal Regulations. However,
as for the financings that are part of the management of Company debt, whenever they are being optimized within the ceilings already authorized by the
Supervisory Board, only a notification to the Board is required.
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• Duties and taxes: within the framework of the Consolidated Global Tax System (“Bénéfice Mondial Consolidé” – BMC), a complete collection of statutory
accounts is organized to ensure the proper translation of results under local accounting rules into results that comply with French tax legislation. The
calculation and accounting treatment of income obtained under the Consolidated Global Tax System is the subject of quarterly monitoring. Moreover,
Vivendi SA provides consulting for group subsidiaries and guarantees the defense of their tax interests before local tax authorities, with the exception
of the companies of the groups Activision Blizzard and GVT, for which it participates in the review and auditing of the Duties and taxes line as part of the
preparation of the Vivendi Group consolidated financial statements.
• Litigation: major disputes and investigations are monitored directly or coordinated by the General Counsel’s office and the Legal Department. The
preparation of a report relating to litigation involving Vivendi and its business units is monitored by the General Counsel and the Legal Department of
the Group in collaboration with the general counsels and heads of the legal departments of the main business units. A summary report is provided to the
Management Board on a monthly basis. A table of current litigation matters, investigations and disputes is updated for each quarterly closing date based
on information provided by each business unit; a summary of this table is included in the Management’s Board quarterly business report to the Supervisory
Board. In addition, the Supervisory Board and the Management Board are kept informed of material ongoing litigation matters by the General Counsel on
a regular basis.
4.5. Information and Communication
The Group’s values, the Compliance Program and the data protection and privacy charter are made available to employees and to the public at www.vivendi.com.
Group procedures designed to assist with the preparation of financial and accounting information are updated at least once a year, and are available in French
and English on the Group’s intranet site. These procedures, which must be applied by each of the Group’s business units and holding companies, include: the IFRS
accounting principles and chart of accounts of the Vivendi group; the principles and procedures applicable to treasury transactions (banking relationships, foreign
exchange, finance and investment); the procedures applicable to investment transactions, sales of assets, short and long-term financing transactions and the
monitoring of disputes; the monitoring of sureties, endorsements and guarantees, as well as the rules relating to advance approval for non-audit engagements
to be performed by the Statutory Auditors of the company.
The IFRS (International Financial Reporting Standards) and the IFRIC (International Financial Reporting Interpretations Committee) interpretations adopted by the
European Union with a mandatory application as of December 31, 2010 and training materials relating to the application of IFRS standards within the Group are
available online and accessible to all employees.
Awareness campaigns are also organized by the General Management and the Finance Departments of certain business units.
4.6. Sustainable development and social responsibility
Vivendi applies a rigorous sustainable development policy, which takes into consideration the economic, social, societal and environmental responsibilities related
to its operations and its geographic presence.
Vivendi’s sustainable development policy is defined based on the features of a group that is: a group that produces and distributes content as part of the technological
developments made possible by broadband and mobile Internet based on a subscription model that conquers new markets in countries with high-growth markets.
The first of these features implies that the group evaluates the opportunities and risks that its content or services could pose to its various customers. This is why,
since 2003, Vivendi has identified three specific sustainable development objectives: protecting and empowering young people when they use multimedia services,
promoting cultural diversity and sharing knowledge.
The second feature relates to the ability that Vivendi must develop to reconcile its need to keep pace with the digital revolution, with the needs of its key stakeholders
(including employees, consumers, artists, suppliers and society at large), and regulatory requirements. Managing human capital, valuing content, paying attention to
suppliers and communicating with its partners are also among the group’s sustainable development objectives.
The third feature relates to collecting and processing the personal data of subscribers and clients of the group’s different business units. In every country where
Vivendi operates, the company seeks to meet subscriber expectations in relation to the content and service offerings while simultaneously maintaining a rigorous
and ethical policy for managing personal data.
The fourth feature relates to implementing an assessment of Vivendi’s contribution to the local development of emerging countries in which the Group operates.
This would take into account employment, capital investment, development of local talent and access to new information and communication technologies, which
is one of the key factors to a successful education system that is being pursued by state governments.
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A solidarity program called Create Joy was launched in September 2008, and it forms part of the group’s civic responsibility initiative. Vivendi helps disadvantaged
young people fulfill their potential by providing them with entertainment and skills related to its businesses: video games, music, telecommunications and Internet,
television and film. This program is deployed in France, the UK, the United States, Brazil, Morocco, Mali and Burkina Faso, countries in which Vivendi is present.
In 2010, it made possible the financing of over 20 projects by associations that work with youth in hospitals, or disabled or disadvantaged youth. Training and sharing
of skills occupy a major place in the selection of the projects supported by Create Joy.
Promoting knowledge sharing to strengthen both a spirit of openness with others and a mutual understanding is a specific objective of Vivendi’s social responsibility.
Through its international position, the group exercises a certain influence over the representation of cultures and through this it can promote mutual understanding.
It must ensure content quality, encourage dialog between cultures, make the public aware of the challenges of sustainable development and facilitate access to
new technologies. Vivendi contributes to reducing the digital divide by enabling students to benefit from advantageous service offers and by conducting training
and educative activities for disadvantaged and deprived individuals using new communication technologies.
The Vivendi Management Board and Risks Committee regularly review the Group’s sustainable development and social responsibility challenges. Sustainable
development risk mapping has been established and a Compliance Program for environmental standards, health and workplace safety has been approved by Vivendi.
Vivendi is part of the Dow Jones Sustainability World Enlarged Index (DJSI World Enlarged) produced by Dow Jones in late November 2010. The group is also
referenced in the FTSE4 Good Global sustainable-development international stock market index produced by the FTSE, the ASPI Eurozone index produced by the
rating agency Vigeo, the Ethibel Sustainability Index (ESI) produced by Ethibel, and the ECPI Ethical Indices (ECPI Ethical Index Global, ECPI Ethical Index EMU, ECPI
Ethical Index Europe) produced by E-capital Partners. In addition, each year Vivendi contributes to the Carbon Disclosure Project (CDP, an international program that
publishes a report on the carbon footprint and climate change strategies of the world’s 500 largest companies).
4.7. Prospects
In 2011, Vivendi intends to continue its campaign aimed at promoting and encouraging its business units and increasing their responsibility in relation to internal
monitoring, particularly for entities which have recently joined the Group. Particular efforts will be made in sustainable development through the launch of work
related to the implementation of the recommendations of the Grenelle II Law on environmental standards.
Paris, Monday, February 28, 2011
Jean-René Fourtou
Chairman of the Supervisory Board
124
Section 5 Statutory Auditors’ Report, prepared in accordance with Article
L.225-235 of the French Commercial Code, on the Report Prepared by
the Chairman of the Supervisory Board of Vivendi S.A.
To the Shareholders,
In our capacity as Statutory Auditors of Vivendi S.A., hereinafter referred to as the “Company”, and in accordance with Article L.225-235 of the French Commercial
Code, we hereby report to you on the report prepared by the Chairman of the Supervisory Board of the Company in accordance with Article L.225-68 of the French
Commercial Code for the year ended 31 December 2010.
It is the Chairman’s responsibility to prepare, and submit for the Supervisory Board’s approval, a report on internal control and risk management procedures
implemented by the Company and to provide the other information required by Article L.225-68 of the French Commercial Code, relating to matters such as
corporate governance.
Our role is to:
• report on any matters as to the information set out in the Chairman’s report with respect to the internal control and risk management procedures relating
to the preparation and processing of the accounting and financial information; and
• attest that this report contains the other disclosures required by Article L.225-68 of the French Commercial Code, it should be noted that our role is not to
verify the fairness of this other information.
We conducted our work in accordance with professional standards applicable in France.
Information on the internal control and risk management procedures relating to the preparation and processing of accounting and
financial information
The professional standards require that we perform the necessary procedures to assess the fairness of the information provided in the Chairman’s report concerning
the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information. These procedures
consisted mainly of:
• obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of the accounting and
financial information on which the information presented in the Chairman’s report is based along with the existing documentation;
• obtaining an understanding of the work involved in the preparation of this information along with existing documentation; and
• determining whether any significant weaknesses in the internal control procedures relating to the preparation and processing of the accounting and
financial information found in the course of our engagement had been properly disclosed in the Chairman’s report.
On the basis of our work, we have no matters to report concerning the information relating to the Company’s internal control and risk management procedures relating
to the preparation and processing of accounting and financial information contained in the report prepared by the Chairman of the Supervisory Board in accordance
with Article L.225-68 of the French Commercial Code.
Other information
We hereby attest that the report prepared by the Chairman of the Supervisory Board contains the other disclosures required by Article L.225-68 of the French
Commercial Code.
Paris-La Defense and Neuilly-sur-Seine, February 28, 2011
The Statutory Auditors
Salustro Reydel
Member of KPMG International
Ernst & Young et Autres
Frédéric Quélin
Partner
Jean-Yves Jégourel
Partner
125
Selected key consolidated
financial data
128
I – 2010 Financial Report
II – Appendix to Financial Report
130
Section 1: Major developments
131
1.1.
1.1.1.
1.1.2.
1.1.3.
1.1.4.
1.2.
131
131
132
132
133
134
Major developments in 2010
Acquisitions/divestitures of financial investments
Transactions with shareholders
New borrowings and credit lines put into place by Vivendi SA and SFR
Other
Major developments since December 31, 2010
Section 2: Earnings analysis
135
2.1.
2.2.
2.3.
135
135
137
Consolidated earnings and adjusted net income
Earnings review
2011 Outlook
Section 3: Cash flow from operations analysis
138
Section 4: Business segment performance analysis
140
4.1.
4.2.
4.2.1.
4.2.2.
4.2.3.
4.2.4.
4.2.5.
4.2.6.
4.2.7.
4.2.8.
Revenues, EBITA and cash flow from operations
by business segment
Comments on operating performance
of business segments
Activision Blizzard
Universal Music Group (UMG)
SFR
Maroc Telecom Group
GVT
Canal+ Group
Holding & Corporate
Non-core operations and others
140
141
142
144
146
148
150
152
154
154
Section 5: Treasury and capital resources
154
5.1.
5.2.
5.3.
5.4.
5.5.
155
156
157
158
159
Summary of Vivendi’s exposure to credit and liquidity risks
Financial Net Debt changes
Analysis of Financial Net Debt changes
Borrowings put into place/redeemed in 2010
Available credit facilities as of February 22, 2011
Section 6: Forward looking statements
159
Section 7: Disclaimer
159
Appendix to Financial Report: Unaudited supplementary
financial data
160
1. Adjusted net income
160
2. Reconciliation of Activision Blizzard’s U.S. GAAP revenues
and EBITA to IFRS
161
3. Revenues and EBITA by business segment – 2010 and 2009
quarter data
164
III – Consolidated Financial
Statements
Consolidated Financial Statements for the year ended
December 31, 2010
165
165
166
167
168
169
170
172
IV – Vivendi SA 2010 Statutory
Financial Statements
271
Nota
In accordance with European Commission Regulation (EC) 809/2004
(Article 28) which sets out disclosure obligations for issuers of securities
listed on a regulated market within the European Union (the “Prospectus
Directive”), the following items are incorporated by reference:
• 2009 Financial Report and the Consolidated Financial Statements
for the year ended December 31, 2009, prepared under IFRS and
the related Statutory Auditors’ Report presented in pages 136 to
292 of the Document de Référence No. D.10-0118, filed on March
17, 2010 with the French Autorité des Marchés Financiers (AMF),
and in pages 136 to 288 of the English translation of this
“Document de Référence”; and
• 2008 Financial Report and the Consolidated Financial Statements
for the year ended December 31, 2008, prepared under IFRS and
the related Statutory Auditors’ Report presented in pages 137
to 294 of the Document de Référence No. D.09-139, filed on
March 19, 2009 with the AMF, and in pages 137 to 290 of the
English translation of this “Document de Référence”.
Financial Report – Consolidated Financial Statements –
Statutory Auditors’ report on the Consolidated Financial Statements –
128
Selected key consolidated financial data
Consolidated data
Revenues (a)
EBITA (a, b)
Earnings attributable to Vivendi shareowners
Adjusted net income (b)
Financial Net Debt (b, c)
Total equity (d)
of which Vivendi shareowners' equity (d)
Cash flow from operations, before capital expenditures, net (CFFO before capex, net)
Capital expenditures, net (capex, net) (e)
Cash flow from operations (CFFO) (b)
Financial investments
Financial divestments
Dividends paid with respect to previous fiscal year
Per share amounts
Weighted average number of shares outstanding
Adjusted net income per share
Number of shares outstanding at the end of the period (excluding treasury shares)
Equity per share, attributable to Vivendi shareowners
Dividends per share paid with respect to previous fiscal year
2010
Year ended December 31,
2009
2008
2007
2006
28,878
5,726
2,198
2,698
8,073
28,173
24,058
8,569
(3,357)
5,212
(1,397)
1,982
1,721
27,132
5,390
830
2,585
9,566
25,988
22,017
7,799
(2,562)
5,237
(3,050)
97
(f) 1,639
25,392
4,953
2,603
2,735
8,349
26,626
22,515
7,056
(2,001)
5,055
(3,947)
352
1,515
21,657
4,721
2,625
2,832
5,186
22,242
20,342
6,507
(1,626)
4,881
(846)
456
1,387
20,044
4,370
4,033
2,614
4,344
21,864
19,912
6,111
(1,645)
4,466
(3,881)
1,801
1,152
1,232.3
2.19
1,237.3
19.44
1.40
1,203.2
2.15
1,228.8
17.92
1.40
1,167.1
2.34
1,170.1
19.24
1.30
1,160.2
2.44
1,164.7
17.47
1.20
1,153.4
2.27
1,155.7
17.23
1.00
In millions of euros, number of shares in millions, data per share in euros.
(a) An analysis of revenues and EBITA by operating segment is presented in Section 4.1 of this Financial Report and in Note 3 to the Consolidated Financial
Statements for the year ended December 31, 2010.
(b) Vivendi considers that the non-GAAP measures EBITA, Adjusted net income, Financial Net Debt, and Cash flow from operations (CFFO) are relevant
indicators of the group’s operating and financial performance. Each of these indicators is defined in the appropriate section of the Financial Report or in
the notes to the Consolidated Financial Statements for the year ended December 31, 2010. These indicators should be considered in addition to, and not
as a substitute for, other GAAP measures of operating and financial performance as disclosed in the Consolidated Financial Statements and the related
notes, or as described in the Financial Report. It should be noted that other companies may define and calculate these indicators differently to Vivendi
thereby affecting comparability.
(c) As of December 31, 2009, Vivendi revised its definition of Financial Net Debt to include certain cash management financial assets whose characteristics
do not strictly comply with the definition of cash equivalents as defined by the Recommendations of the AMF and by IAS 7 (in particular, these financial
assets may have a maturity of up to 12 months). Considering that no investment in such assets was made prior to 2009, the retroactive application of this
change of presentation would have no impact on Financial Net Debt for the relevant periods and the information presented in respect of the previous
fiscal years from 2006 to 2008, is therefore consistent. Please refer to Section 5 of the Financial Report for the year ended December 31, 2010.
(d) Vivendi voluntarily opted for the early application, with effect from January 1, 2009, of the revised IFRS 3 (Business Combinations) and IAS 27 (Consolidated
and Separate Financial Statements). In particular, revised IAS 27 requires that the consolidated financial statements of a group are presented as those of
a single economic entity with two categories of owners: the shareowners of Vivendi SA and the owners of non-controlling interests. As a result, certain
reclassifications have been made to the 2008 consolidated statement of changes in equity to conform to the presentation of the 2009 financial statements, as
prescribed by revised IAS 27. In addition, revised IFRS 3 introduced changes to the acquisition method as defined by IFRS 3, in particular it is now permitted to
value the non-controlling interests in an acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
Please refer to Note 1 to the Consolidated Financial Statements for the year ended December 31, 2010.
(e) Relates to cash used for capital expenditures, net of proceeds from sales of property, plant and equipment, and intangible assets.
(f) The dividend distribution with respect to fiscal year 2008 totalled €1,639 million, of which €904 million was paid in Vivendi shares (which had no impact
on cash) and €735 million was paid in cash.
129
Vivendi 2010 Financial Report
Preliminary comments:
On February 22, 2011, during a meeting held at the headquarters of the company, the Management Board approved the Annual Financial Report and the Consolidated
Financial Statements for the year ended December 31, 2010. Having considered the Audit Committee’s recommendation given at its meeting held on February 24, 2011,
the Supervisory Board, at its meeting held on February 28, 2011, reviewed the Annual Financial Report and the Consolidated Financial Statements for the year ended
December 31, 2010, as approved by the Management Board on February 22, 2011.
The Consolidated Financial Statements for the year ended December 31, 2010 have been audited and certified by the Statutory Auditors with no qualified opinion.
The Statutory Auditors’ Report on the Consolidated Financial Statements is included in the preamble to the Financial Statements.
Financial Report – Consolidated Financial Statements – Statutory Financial Statements
I – 2010 Financial Report
130
Following the sale of Vivendi’s stake in NBC Universal and the favorable settlement of the litigation in Poland, Vivendi now controls alone all of its assets. More than
ever, customers of digital content and services lie at the heart of Vivendi’s focus. Vivendi will combine its investments in networks, platforms and content with
sustained efforts to develop projects, to share expertise between its divisions and stimulate innovation to enhance Vivendi’s organic growth. As a result, Vivendi is
pursuing its profitable growth strategy, while maintaining an investment grade debt rating. The key elements of Vivendi’s strategy remain unchanged: the buy-out
of minority interests in France at a reasonable price, financial discipline and a high cash dividend with a distribution rate of at least 50% of Adjusted Net Income.
For more information, please refer to Section 1.1 of Chapter 2 of the 2010 Annual Report.
2010
• In January, SFR paid a €1 billion dividend (of which €440 million was paid to Vodafone) with respect to fiscal year 2009.
• On February 18, SFR and Réseau Ferré de France entered into a GSM-R public-private partnership agreement.
• On February 22, Vivendi/Canal+ Group acquired from M6 a 5.1% interest in the share capital of Canal+ France.
• On April 2, Activision Blizzard paid a $189 million dividend (of which $108 million was paid to Vivendi) with respect to fiscal year 2009.
• On April 15, Lagardère decided to exercise its liquidity rights regarding its 20% interest in the share capital of Canal+ France.
• On April 27, Vivendi held a 99.17% controlling interest in GVT.
• In May, Vivendi paid a cash dividend of €1.40 per share with respect to fiscal year 2009, representing a total distribution of €1,721 million.
• On June 11, Vivendi obtained a 100% controlling interest in GVT following the cancellation of GVT outstanding common shares.
• In June, SFR acquired additional 3G mobile telephony spectrum for €300 million.
• On August 26, La Poste Group and SFR entered into exclusive negotiations to form a partnership to develop a mobile telephony offering under the
“La Poste” brand.
• On September 26, Vivendi sold a 7.66% interest in NBC Universal to General Electric for $2 billion.
• On December 14, Vivendi, Deutsche Telekom, the main shareholder of Elektrim and the creditors of Elektrim entered into certain agreements (subject
to conditions precedent) to end the telecommunications dispute in Poland.
• On December 23, Maroc Telcom completed the acquisition process of a 51% interest in Gabon Telecom Group.
• On December 30, Vivendi acquired a 65% interest in Digitick.
2009
• On March 13, the authorization to use the Consolidated Global Profit Tax System was renewed for the taxable years from 2009 to 2011.
• On June 15, Canal+ Group launched a pay-TV platform in Vietnam.
• In June, Vivendi paid a dividend of €1.40 per share for fiscal year 2008, representing a total distribution of €735 million in cash and €904 million in shares.
• On July 31, Maroc Telecom acquired a 51% interest in Sotelma.
• On November 13, Vivendi took over Global Village Telecom (GVT), the leading alternative telecommunications operator in Brazil.
• On December 3, Vivendi announced an agreement to sell its 20% interest in NBC Universal.
• On December 8, Universal Music Group launched the new music site VEVO in the United States and Canada.
• On December 28, Vivendi/Canal+ Group acquired from TF1 a 10% interest in the share capital of Canal+ France.
2008
• On February 6, after completion of a bidding process, Canal+ Group was awarded nine out of the ten television lots offered for League 1 broadcasting
rights by the French Professional Football League (2008-2009 to 2011-2012).
• On February 25, UMG completed the sale of certain music publishing catalogs.
• In February, Vivendi obtained a €3.5 billion syndicated loan.
• On April 2, StudioCanal acquired the entire share capital of Kinowelt.
• On April 15, SFR took over Neuf Cegetel.
• In April, Vivendi completed the early redemption of all of its outstanding bonds exchangeable for Sogecable shares.
• In April, Vivendi raised $1.4 billion from an issue of US dollar bonds.
• On May 5, UMG acquired Univision Music Group.
• In May, Vivendi paid a cash dividend of €1.30 per share for fiscal year 2007, representing a total distribution of €1,515 million.
• On June 24, Neuf Cegetel was delisted from Euronext Paris as a result of the successful completion of SFR’s simplified tender offer made from May 19
to June 13.
• On July 9, Activision Blizzard was created.
131
1.1. Major developments in 2010
1.1.1. Acquisitions/divestitures of financial investments
Completion of the acquisition of GVT (Holding) S.A. in Brazil
As a reminder, on November 13, 2009, Vivendi took over GVT (Holding) S.A. (GVT), which, since that date, has been fully consolidated by Vivendi. As of
December 31, 2009, Vivendi held an 82.45% controlling interest in GVT representing a total investment of €2,507 million.
In 2010, Vivendi obtained a 100% controlling interest in GVT following the acquisition of the 17.55% equity interest it did not hold, representing an additional cash
payment of €590 million, as follows:
• During the first quarter, Vivendi acquired 6.3 million GVT shares directly on the market for a total price of €144 million;
• On March 26, 2010, the Brazilian Securities and Exchange Commission (Commisão de Valores Mobiliàros, “CVM”) approved the registration of the public
tender offer for the acquisition of 17.8 million GVT shares (the “Tender Offer”), not already held by Vivendi on that date at BRL56 per share (the “Offer
Price”), adjusted by reference to fluctuations in the SELIC Rate (Taxa Referencial do Sistema Especial de Liquidação e Custódia) over the period between
November 13, 2009 and April 30, 2010, the Tender Offer settlement date. On April 27, 2010, at the close of the regulatory auction, Vivendi acquired an
additional 16.6 million GVT common shares for a purchase price of €416 million resulting in a 99.17% controlling interest in GVT. As a result, on May 7, 2010,
in accordance with Brazilian securities regulations and following the CVM’s authorization, GVT was deregistered as a public company; and
• Finally, on June 11, 2010, GVT cancelled its outstanding common shares pursuant to a squeeze-out transaction that was approved by the shareholders’
meeting on June 10, 2010, and made a €30 million deposit with a Brazilian bank in order to guarantee and enable the repayment of the shareholders
whose shares were cancelled.
After taking into account all of its component items, the purchase price for 100% of GVT by Vivendi amounts to €3,038 million. As a reminder, transactions that
occurred in 2010 did not have any significant impact on Vivendi’s Financial Net Debt. In accordance with applicable accounting standards, the commitment to
purchase shares not held by Vivendi as of December 31, 2009 was recorded as a financial liability and included in Vivendi’s Financial Net Debt on that date.
For a detailed description of this transaction and its impacts on Vivendi’s financial statements, please refer to Note 2.1 to the Consolidated Financial Statements
for the year ended December 31, 2010.
Sale of NBC Universal
At the conclusion of the NBC Universal transaction completed in May 2004, Vivendi held an equity interest in NBC Universal of 20%, and General Electric (GE) owned
the remaining 80%. Pursuant to various agreements entered into between Vivendi and GE, Vivendi and GE shared governance rights and each had a right to receive
any dividends paid by NBC Universal pro rata to its then-current interest. In December 2009, Vivendi agreed that it would sell its 20% interest in NBC Universal to GE
(as amended, the “2009 Agreement”). The 2009 Agreement was entered into in connection with GE’s concurrent agreement with Comcast Corporation (“Comcast”)
to form a new joint venture that would own 100% of NBC Universal and certain Comcast assets (the “Comcast Transaction”). Pursuant to the 2009 Agreement,
Vivendi agreed to sell its 20% interest in NBC Universal to GE for $ 5,800 million, in two transactions, the second of which was contingent upon the completion of the
Comcast Transaction. On September 26, 2010, Vivendi sold a 7.66% interest in NBC Universal to GE for $2,000 million. The remainder of Vivendi’s interest, or 12.34%
of NBC Universal, was sold to GE on January 25, 2011 for $3,800 million (which includes an additional $222 million received in relation to the previously sold 7.66%
interest), in advance of the closing of the Comcast Transaction. In addition, Vivendi received its pro rata share of dividends for the period from January 1, 2010 to
January 25, 2011 (the date of sale), totaling approximately $390 million, of which approximately $300 million was received in 2010.
The accounting treatment applied by Vivendi with respect to the sale of its interest in NBC Universal was as follows:
• In accordance with the 2009 Agreement, while Vivendi’s interest in NBC Universal was reduced to 12.34% following the sale of a 7.66% interest in NBC
Universal, Vivendi’s governance rights in NBC Universal did not change (including in terms of proportionate membership on the board of directors) until
Vivendi sold its entire interest in NBC Universal on January 25, 2011. As a result, until the latter date, Vivendi continued to exercise significant influence
over NBC Universal and therefore accounted for its 12.34% interest in NBC Universal under the equity method.
• On September 26, 2010, the sale to GE of a 7.66% interest in NBC Universal resulted in a capital loss of €232 million, mostly comprised of foreign currency
translation adjustments reclassified to earnings for €281 million, representing the foreign exchange loss attributable to the decline of the US dollar since
January 1, 2004. As of December 31, 2010, the residual balance of the foreign currency translation adjustments related to Vivendi’s remaining 12.34%
interest in NBC Universal represented a potential foreign exchange loss of €404 million.
• On January 25, 2011, the sale of the remaining 12.34% interest in NBC Universal to GE resulted in a capital loss estimated at €357 million, which is
expected to be accounted for in the 2011 first quarter earnings and mostly comprised of the aforementioned foreign currency translation adjustments.
• Starting December 2009, after Vivendi had agreed that it would sell its 20% interest in NBC Universal to GE for a total amount of $5,800 million, Vivendi
gradually hedged its investment in NBC Universal using currency forward sales contracts denominated in US dollars, at an average exchange rate of
1.33 dollar/Euro. From an accounting perspective, these forward contracts were qualified as net investment hedges in NBC Universal. On September 26, 2010,
forward sales contracts for a nominal value of $2,000 million were unwound for €1,425 million. On January 25, 2011, forward sales contracts for a nominal
value of $3,800 million were unwound for €2,921 million.
Section 1 Major developments
132
1.1.2. Transactions with shareholders
Dividend paid by Vivendi SA to its shareholders with respect to fiscal year 2009
On April 29, 2010, Vivendi’s Annual Shareholders’ Meeting approved the recommendations of Vivendi’s Management Board relating to the allocation of distributable
earnings for fiscal year 2009. As a result, the dividend payment was set at €1.40 per share, representing a total distribution of €1,721 million, which was paid in cash
on May 11, 2010.
Activision Blizzard
Repurchase by Activision Blizzard of its common stock
On February 10, 2010, Activision Blizzard announced that its Board of Directors had authorized a new stock repurchase program under which Activision Blizzard can
repurchase shares of its outstanding common stock up to an amount of $1 billion. In 2010, Activision Blizzard repurchased approximately 86 million shares of its
common stock in connection with this program, for a total amount of $966 million, of which approximately 84 million shares were paid in 2010 ($944 million) and
1.8 million shares were paid in January 2011 ($22 million). In addition, in January 2010, Activision Blizzard settled a $15 million purchase of 1.3 million shares of its
common stock that it had agreed to repurchase in December 2009 pursuant to the previous $1.25 billion stock repurchase program, completing that program. In total,
Activision Blizzard repurchased approximately 85 million shares of its common stock in 2010, for an amount of $959 million, or €726 million (compared to $1.1 billion or
€792 million in 2009). As of December 31, 2010, Vivendi held an approximate 61% interest (non-diluted) in Activision Blizzard (compared to an approximate 57%
interest as of December 31, 2009).
In addition, on February 9, 2011, Activision Blizzard announced that its Board of Directors had authorized a new stock repurchase program under which Activision
Blizzard can repurchase shares of its outstanding common stock up to an amount of $1.5 billion. This program will end at the earlier of March 31, 2012 or on the date of
the Board of Directors’ decision to discontinue it (please refer to Note 18 to the Consolidated Financial Statements for the year ended December 31, 2010).
Dividend proposed
On February 9, 2011, Activision Blizzard also announced that its Board of Directors had declared a cash dividend of $0.165 per common share to shareholders. This
dividend will be paid in cash on May 11, 2011.
Dividend paid by SFR
At SFR’s Shareholders’ Meeting, held on March 30, 2010, the shareholders approved the payment of a €1 billion dividend (of which €440 million was paid to Vodafone)
with respect to fiscal year 2009, which was paid in January 2010 as an interim dividend.
At its meeting held on December 6, 2010, SFR’s Board of Directors decided to pay a €1 billion interim dividend with respect to fiscal year 2010 on January 28, 2011.
Canal+ France
Acquisition of Canal+ France’s non-controlling interests
As part of the combination of the Canal+ Group and TPS pay-TV activities in France finalized in January 2007, TF1 and M6 were granted a put option by Vivendi over
their respective 9.9% and 5.1% interests in the share capital of Canal+ France. These options were exercisable in February 2010 at the market price determined by an
expert subject to a minimum price of €1,130 million for a 15% interest in the share capital of Canal+ France (corresponding to a valuation of €7.5 billion for 100% of the
share capital of Canal+ France).
• On December 28, 2009, Vivendi/Canal+ Group acquired TF1’s 9.9% interest in the share capital of Canal+ France for €744 million, corresponding to the
minimum price of the option on that date.
• On February 22, 2010, M6 exercised its put option for €384 million, corresponding to the minimum price of the option on that date, and thus ceased to hold
an interest in the share capital of Canal+ France as of that date.
In accordance with accounting standards applicable at the date of the combination, to the extent that the put options initially granted to TF1 and M6 were recorded as
financial liabilities in Vivendi’s Financial Net Debt, these transactions have no impact on Vivendi’s Financial Net Debt. As a result of these transactions, Canal+ Group
(a wholly owned subsidiary of Vivendi) holds an 80% controlling interest in Canal+ France.
IPO process of Lagardère’s non-controlling interest in Canal+ France
On April 15, 2010, Lagardère decided to exercise its liquidity right regarding its 20% interest in Canal+ France. As Lagardère and Vivendi had not reached an
agreement regarding the sale of its interest, Lagardère decided on July 2, 2010, in accordance with the shareholders agreement signed on January 4, 2007, to launch
the Initial Public Offering (IPO) process for its 20% interest in Canal+ France. This IPO process is in progress: on February 16, 2011, Canal+ France filed the Initial Public
Offering (IPO) Prospectus with the French Autorité des Marchés Financiers (AMF). For a detailed description of the shareholders agreement, please refer to Note 26.5
to the Consolidated Financial Statements for the year ended December 31, 2010.
1.1.3. New borrowings and credit lines put into place by Vivendi SA and SFR
Please refer to Section 5.4 of this Financial Report.
133
1.1.4. Other
As a reminder, on January 29, 2010, the jury rendered its verdict in the Securities Class Action lawsuit in Federal Court in the State of New York. Following an
assessment of this verdict and all aspects of these proceedings, and using ad-hoc experts and in accordance with appropriate accounting principles, Vivendi
recognized a €550 million reserve as of December 31, 2009, with respect to the estimated damages, if any, that might be paid to the plaintiffs.
At a hearing that took place in New York on July 26, 2010, Vivendi petitioned the Court to apply the decision in the Morrison v. National Australia Bank case
(the “Morrison” decision) rendered by the US Supreme Court on June 24, 2010, and therefore to exclude from the class shareholders who did not purchase or sell
their shares on a US exchange.
Vivendi re-examined the amount of the reserve related to this litigation, given the decision rendered by the US District Court for the Southern District of New-York on
February 17, 2011 in our case, which followed the US Supreme Court’s decision on June 24, 2010 in the Morrison case. Using the same methodology and the same
valuation experts as in 2009, Vivendi re-examined the amount of the reserve and set it at €100 million as of December 31, 2010, in respect of the damages, if any,
that Vivendi might have to pay solely to shareholders who have purchased ADRs in the United States. Consequently, as of December 31, 2010, Vivendi recognized
a €450 million reversal of reserve, compared to an accrual of €550 million as of December 31, 2009.
Activision Blizzard
On July 27, 2010, Activision Blizzard launched Starcraft ® II: Wings of Liberty ™ and sold more than 3 million copies worldwide in the first month of its release.
On November 9, 2010, Activision Blizzard launched Call of Duty ®: Black Ops, which was one of the top entertainment properties of the holiday season. The game
established an all-new five-day worldwide sell-through record of more than $650 million.
On December 7, 2010, Activision Blizzard launched World of Warcraft ®: Cataclysm ™ , the third expansion for the massively multiplayer online role-playing game
(MMORPG) World of Warcraft and sold through more than 3.3 million copies worldwide during its first 24 hours of release, making it the fastest-selling PC game
of all time.
SFR
GSM-R public-private partnership agreement
On February 18, 2010, a group consisting of SFR, Vinci and AXA (30% each) and TDF (10%) entered into the GSM-R (Global System for Mobile communications
- Railway) public-private partnership agreement with Réseau Ferré de France (RFF). The 15-year agreement, valued at approximately €1 billion, covers the financing,
building, operation and maintenance of the digital telecommunication network that enables conference mode communications (voice and data) between train drivers
and rail control teams. It will be rolled out gradually until 2015 over 14,000 km of conventional and high-speed railway lines in France.
Additional 3G mobile telephony spectrum
In June 2010, following a call for tenders for 3G mobile telephony residual spectrum, “the Arcep” (the French Telecommunications Regulatory Body) granted SFR
a 5 MHz spectrum band for a total amount of €300 million.
Exclusive negotiations with La Poste
On November 4, 2010, La Poste Group’s Board of Directors announced that it selected SFR to form a partnership to develop a mobile telephony offering under the
“La Poste Mobile” brand. The implementation of this partnership should be effective in the first quarter 2011 after approval of the French Competition Authority.
134
Agreements to end litigation over telecommunication assets in Poland
As a reminder, due to the litigations which opposed Vivendi and its subsidiary Elektrim Telekomunikacja (Telco) against Deutsche Telekom and Elektrim SA (Elektrim),
the legal uncertainty surrounding the ownership of Telco’s stake in Polska Telefonia Cyfrowa (PTC), a mobile telecommunication operator, prevented Telco from
exercising joint control over PTC, in accordance with PTC’s the by-laws. As a result, Vivendi did not consolidate its stake in PTC, whose carrying value was decreased
to zero since the year ended December 31, 2006.
On December 14, 2010, Vivendi signed certain agreements with Deutsche Telekom, Mr. Solorz-Zak (the main shareholder of Elektrim) and the creditors of Elektrim,
including the Polish State and Elektrim’s bondholders in order to put an end to the litigation surrounding the PTC share capital ownership. On January 14, 2011, once all
conditions precedent to completion under the agreements were satisfied, Vivendi received €1,254 million and waived any rights to the shares of PTC, ending
consequently all litigation surrounding the PTC share capital ownership. In its Financial Statements for the first quarter ended March 31, 2011, the proceeds received
from Deutsche Telekom and Elektrim will be recognized as a net gain of €1,254 million, which will be classified as other financial income.
Completion of the acquisition of a 51% interest in Groupe Gabon Telecom by Maroc Telecom
On December 23, 2010, the state of Gabon and Maroc Telecom entered into an amendment to the February 9, 2007 agreement regarding the sale of shares, thus
ending the acquisition process for a 51% interest in Groupe Gabon Telecom by Maroc Telecom. In accordance with this agreement, Maroc Telecom notably paid to the
state of Gabon the €35 million balance of the acquisition price, in addition to the 2007 initial payment of €26 million.
Acquisition of Digitick
On December 30, 2010, Vivendi acquired a 65% interest in Digitick, the French leader in web ticketing (e-ticket), for a purchase price of €29 million and an enterprise
value of €45 million. In addition, since SFR already held a 27% interest in Digitick, Vivendi controls an approximate 92% interest in Digitick.
1.2. Major developments since December 31, 2010
The main developments that occurred between December 31, 2010 and February 22, 2011, the date of the Management Board meeting that approved the financial
statements for the fiscal year 2010 are as follows:
• End to the litigation in Poland: on January 14, 2011, completion of the agreements entered into in December 2010 and receipt of net cash proceeds of
€1,254 million by Vivendi (please refer to Section 1.1.4);
• On January 19, 2011, Canal+ Group and Orange announced their intention to create a joint-venture in order to merge Orange Cinema Series and TPS Star;
• Completion of the sale of Vivendi’s interest in NBC Universal for $3,800 million received on January 25, 2011; Vivendi received a total amount of
$5,800 million (please refer to Section 1.1.1);
• New stock repurchase program under which Activision Blizzard can repurchase shares of its outstanding common stock up to an amount of $1.5 billion
(please refer to Section 1.1.2); and
• Securities Class Action in the United States (please refer to Section 1.1.4).
135
Section 2 Earnings analysis
2.1. Consolidated earnings and adjusted net income
Consolidated statement of earnings
(in millions of euros, except per share amounts)
Revenues
Cost of revenues
Margin from operations
Selling, general and administrative expenses excluding amortization
of intangible assets acquired through business combinations
Restructuring charges and other operating charges and income
Amortization of intangible assets acquired through
business combinations
Impairment losses of intangible assets acquired through
EBIT
Income from equity affiliates
Interest
Income from investments
Other financial charges and income
Earnings from continuing operations before
provision for income taxes
Provision for income taxes
Earnings from continuing operations
Earnings from discontinued operations
Earnings
Of which
Non-controlling interests
Earnings attributable to Vivendi shareowners per share basic (in euros)
Earnings attributable to Vivendi shareowners per share diluted (in euros)
Adjusted statement of earnings
Year ended
December 31,
2010
2009
Year ended
December 31,
2010
2009
28,878
(14,561)
14,317
27,132
(13,627)
13,505
28,878
(14,561)
14,317
(8,456)
(135)
(8,069)
(46)
(8,456)
(135)
(603)
(634)
(252)
4,871
195
(492)
7
(17)
(920)
3,836
171
(458)
7
(795)
4,564
(1,042)
3,522
3,522
27,132
(13,627)
13,505
Revenues
Cost of revenues
Margin from operations
Selling, general and administrative expenses excluding amortization
(8,069)
of intangible assets acquired through business combinations
(46)
5,726
195
(492)
7
5,390
171
(458)
7
EBITA
Interest
2,761
(675)
2,086
2,086
5,436
(1,257)
5,110
(747)
Adjusted earnings from continuing operations
before provision for income taxes
4,179
4,363
2,198
1,324
830
1,256
2,698
1,481
2,585
1,778
Adjusted net income before non-controlling interests
Of which
Adjusted net income
1.78
0.69
2.19
2.15
Adjusted net income per share - basic (in euros)
1.78
0.69
2.18
2.14
Adjusted net income per share - diluted (in euros)
2.2. Earnings review
Adjusted net income was €2,698 million (or €2.19 per share1) in 2010, compared to €2,585 million (or €2.15 per share) in 2009. The €113 million increase (+4.4%) in
adjusted net income resulted primarily from:
• a €336 million increase in EBITA to a total of €5,726 million. This increase mainly reflected the performance of Activision Blizzard (+€208 million), Maroc
Telecom Group (+€40 million) and Canal+ Group (+€38 million) respectively, as well as the consolidation of GVT (+€257 million), which Vivendi took control
of on November 13, 2009, partially offset by a decline in the performance of Universal Music Group (-€109 million) and SFR (-€58 million);
• a €24 million increase in income from equity affiliates, attributable to NBC Universal;
• a €34 million increase in interest expense;
• a €510 million increase in income tax expense, primarily due to the decrease of the share attributable to SFR’s non-controlling interest in the current
tax savings realized as a result of the utilization by SFR of Neuf Cegetel’s tax losses carried forward from prior years (-€297 million) and to the increase in
taxable income of business segments, particularly Activision Blizzard, as well as to the impact of the consolidation of GVT; and
• a €297 million decrease in adjusted net income due to non-controlling interests, primarily attributable to the decrease in the share attributable to SFR’s
non-controlling interest in the current tax savings realized as a result of SFR’s utilization of Neuf Cegetel’s tax losses carried forward from prior years.
Breakdown of the main items from the statement of earnings
Revenues were €28,878 million, compared to €27,132 million in 2009, an increase of €1,746 million (+6.4%, or +4.2% at constant currency). For a breakdown of
revenues by business segment, please refer to Section 4 of this Financial Report.
Costs of revenues amounted to €14,561 million, compared to €13,627 million in 2009, representing an additional charge of €934 million (+6.9%).
Margin from operations increased by €812 million to €14,317 million, compared to €13,505 million in 2009 (+6.0%).
1. For the calculation of adjusted net income, please refer to Appendix 1 of this Financial Report.
136
Selling, general and administrative expenses, excluding amortization of intangible assets acquired through business combinations, amounted to €8,456 million,
compared to €8,069 million in 2009, representing an additional charge of €387 million (+4.8%).
Depreciation and amortization of tangible and intangible assets are included either in the cost of revenues or as selling, general and administrative expenses.
Depreciation and amortization, excluding amortization of intangible assets acquired through business combinations, were €2,483 million, compared to €2,246 million
in 2009, representing an additional charge of €237 million (+10.6%). This increase primarily resulted from the consolidation of GVT (+€134 million), which Vivendi took
control of on November 13, 2009, as well as an increase in the amortization of telecommunication network assets at SFR and Maroc Telecom Group.
Restructuring charges and other operating charges and income amounted to a net charge of €135 million, compared to €46 million in 2009, an increase of
€89 million. In 2010, they primarily included restructuring charges of €90 million (compared to €91 million in 2009), of which €60 million was incurred by UMG
(compared to €59 million in 2009). In 2009, other operating charges and income included a €40 million earn-out income at Holding & Corporate related to the disposal
of real estate assets in Germany in 2007.
EBITA was €5,726 million, compared to €5,390 million in 2009, an increase of €336 million (+6.2%, or +4.5% at constant currency). For a breakdown of EBITA by
business segment, please refer to Section 4 of this Financial Report.
Amortization of intangible assets acquired through business combinations was €603 million, compared to €634 million in 2009, a decrease of €31 million
(-4.9%). A €96 million decrease in amortization of Activision Blizzard’s intangible assets, as a result of impairment losses recorded at the end of 2009, was notably
offset by the amortization of GVT’s customer base acquired in November 2009 (€50 million).
Impairment losses on intangible assets acquired through business combinations were €252 million, compared to €920 million in 2009. In 2010, they
comprised the impairment of internally developed franchises and certain licenses (€217 million) acquired from Activision in July 2008, as well as certain UMG catalogs
(€27 million). In 2009, they primarily comprised of the impairment of goodwill related to UMG (€616 million) as well as internally developed franchises (€252 million)
and certain licenses (€39 million) acquired from Activision in July 2008.
EBIT was €4,871 million, compared to €3,836 million in 2009, an increase of €1,035 million (+27.0%).
Income from equity affiliates was €195 million, compared to €171 million in 2009. In 2010, Vivendi’s share of income earned by NBC Universal was €201 million,
compared to €178 million in 2009.
Interest was an expense of €492 million, compared to €458 million in 2009, an increase of €34 million (+7.4%).
Interest expense on borrowings amounted to €521 million in 2010, compared to €486 million in 2009, a €35 million increase (+7.2%). This increase was attributable to
the increase in average outstanding borrowings to €12.7 billion in 2010 (compared to €10.2 billion in 2009), primarily resulting from the financing of the GVT acquisition
(€3.0 billion), offset by the decrease in the average interest rate on borrowings to 4.09% in 2010 (compared to 4.75% in 2009).
Interest income earned on cash and cash equivalents remained stable to €29 million in 2010, compared to €28 million in 2009; the decrease in the average interest
income rate to 0.88% in 2010 (compared to 0.92% in 2009) was offset by the increase in average cash and cash equivalents to €3.3 billion in 2010 (compared to
€3.0 billion in 2009).
For more information, please refer to Note 5 to the Consolidated Financial Statements for the year ended December 31, 2010.
Vivendi re-examined the amount of the reserve related to the Securities Class Action litigation in the United States, given the decision rendered by the
US District Court for the Southern District of New-York on February 17, 2011 in our case, which followed the US Supreme Court’s decision on June 24, 2010 in the
Morrison case. Using the same methodology and the same valuation experts as in 2009, Vivendi re-examined the amount of the reserve and set it at €100 million
as of December 31, 2010, in respect of the damages, if any, that Vivendi might have to pay solely to shareholders who have purchased ADRs in the United States.
Consequently, as of December 31, 2010, Vivendi recognized a €450 million reversal of reserve, compared to an accrual of €550 million as of December 31, 2009 (please
refer to Note 27 to the Consolidated Financial Statements for the year ended December 31, 2010).
Other financial charges and income were a net charge of €17 million, compared to a net charge of €795 million in 2009. This change primarily reflected the
adjustment to the reserve related to the Securities Class Action litigation in the United States.
Other financial charges and income related to financial investing activities were a net charge of €305 million, compared to a net charge of €106 million in 2009, and
primarily included the impact of the agreement entered into in December 2009 between Vivendi and GE setting the terms and conditions for Vivendi’s full exit from the
share capital of NBC Universal (please refer to Section 1.1). In 2010, Vivendi recognized a capital loss incurred on the sale of a 7.66% interest in NBC Universal
(-€232 million, of which -€281 million related to a foreign currency translation adjustment reclassified to earnings, which represented a foreign exchange loss
attributable to the decline in value of the US dollar since January 1, 2004) completed at the end of September 2010 as the first step in the sale of Vivendi’s 20%
interest in NBC Universal. In 2009, based on the economic terms of the agreement with GE that valued Vivendi’s 20% interest in NBC Universal at $5.8 billion, Vivendi
recognized a €82 million impairment loss on this interest. In addition, in 2010, other financial charges and income included the €67 million cost incurred as part of the
settlement reached with the Brazilian Comissao de Valores Mobiliarios (CVM). As stated under Brazilian law, this settlement does not imply the acknowledgement of
any wrongdoing by Vivendi in the context of GVT’s acquisition, nor a determination by the CVM of any violation of the Brazilian Stock Exchange regulations by Vivendi.
137
Other financial charges and income related to financing activities were a net income of €288 million, compared to a net charge of €689 million in 2009. This change
primarily reflected the impact of the Securities Class Action litigation in the United States.
Provision for income taxes was a net charge of €1,042 million, compared to €675 million in 2009. This increase was mainly attributable to the increase in the
taxable income of business segments in 2010, particularly Activision Blizzard.
In addition, income taxes reported to adjusted net income was a net charge of €1,257 million, compared to a net charge of €747 million in 2009. This increase was
notably driven by the increase in taxable income of business segments, particularly Activision Blizzard, and the impact of the consolidation of GVT since
November 13, 2009, as well as the decrease of the share attributable to SFR’s non-controlling interest in the current tax savings realized as a result of the utilization
by SFR of Neuf Cegetel’s tax losses carried forward from prior years (-€297 million). Excluding this last impact, the effective tax rate reported to adjusted net income
was 24.6%, compared to 21.8% in 2009, an increase of 2.8 percentage points. The change in rate was primarily attributable to the decrease in tax attributes
recognized in 2010, compared to 2009.
Earnings attributable to non-controlling interests amounted to €1,324 million, compared to €1,256 million in 2009. The €68 million increase was mainly
attributable to the increase in earnings of non-controlling interests in Activision Blizzard (€97 million), partially offset by earnings attributable to non-controlling
interests in Canal+ France following the acquisition of the non-controlling interests held by TF1 and M6 (approximately €43 million).
Adjusted net income attributable to non-controlling interests amounted to €1,481 million, compared to €1,778 million in 2009, a decrease of €297 million. This change
primarily reflected the decrease in the share attributable to SFR’s non-controlling interest in the current tax savings realized as a result of the utilization by SFR of Neuf
Cegetel’s ordinary tax losses carried forward from prior years (€33 million, compared to €330 million in 2009). In addition, the decrease in adjusted net income
attributable to Canal+ France’s non-controlling interests (approximately -€47 million) following the acquisition of the non-controlling interests held by TF1 and M6 was
offset by the increase in adjusted net income attributable to Activision Blizzard’s non-controlling interests (+€43 million).
Earnings attributable to Vivendi shareowners amounted to €2,198 million (or €1.78 per share), compared to €830 million (or €0.69 per share) in 2009, an increase
of €1,368 million (+164.8%).
The reconciliation of earnings attributable to Vivendi shareowners with adjusted net income is further described in Appendix 1 of this Financial Report. In
2010, this reconciliation primarily included the reversal of the reserve recorded with respect to the Securities Class Action litigation in the United States
(+€450 million), the amortization of intangible assets acquired through business combinations (-€451 million, after taxes and non-controlling interests), the capital loss
incurred on the sale of a 7.66% interest in NBC Universal (-€232 million, of which -€281 million related to a foreign currency translation adjustment reclassified to
earnings, which represented a foreign exchange loss attributable to the decline in value of the US dollar since January 1, 2004) completed at the end of
September 2010 as the first step in the sale of the 20% interest in NBC Universal, as agreed with General Electric in December 2009, and the impact of reversing the
deferred tax asset (-€76 million) related to the utilization by SFR of Neuf Cegetel’s ordinary tax losses carried forward from prior years.
In 2009, this reconciliation notably included the impact of reversing the deferred tax asset (-€750 million) relating to the utilization by SFR of Neuf Cegetel’s ordinary
tax losses carried forward from prior years, the amortization and impairment losses on intangible assets acquired through business combinations (-€1,056 million,
after taxes and non-controlling interests), the reserve accrued with respect to the Securities Class Action litigation in the United States (-€550 million) and an
additional impairment loss relating to the 20% interest in NBC Universal (-€82 million), partially offset by the increase in savings expected in 2010 from the
Consolidated Global Profit Tax System (+€292 million).
2.3. 2011 Outlook
Despite difficult economic conditions, and regulatory and tax measures weighing heavily on our investment, 2011 should see slight increase in Vivendi’s adjusted net
income excluding NBC Universal and the maintaining of a high cash dividend.
138
Section 3 Cash flow from operations analysis
Preliminary comment:
Vivendi considers that the non-GAAP measures cash flow from operations (CFFO), cash flow from operations before capital expenditures (CFFO before capex, net)
and cash flow from operations after interest and taxes (CFAIT) are relevant indicators of the group’s operating and financial performance. These indicators should
be considered in addition to, and not as substitutes for, other GAAP measures as reported in Vivendi’s cash flow statement, contained in the group’s Consolidated
Financial Statements.
In 2010, cash flow from operations before capital expenditures (CFFO before capex, net) generated by business segments amounted to €8,569 million
(compared to €7,799 million in 2009), a €770 million increase (+9.9%). This change was primarily driven by the increase in EBITDA after changes in net working capital
of business segments (+€745 million), primarily attributable to the respective performances of Activison Blizzard and UMG, as well as the integration of GVT
(+€348 million), consolidated since November 2009. This change also reflected lower restructuring charges (+€97 million), offset by the decrease in dividends received
from equity affiliates (-€71 million). In 2010, dividends received from NBC Universal amounted to €233 million, compared to €306 million in 2009.
In 2010, capital expenditures, net amounted to €3,357 million (compared to €2,562 million in 2009), a €795 million increase (+31.0%). This change primarily
reflected the acquisition by SFR (€300 million) in June 2010 of an additional band of 3G mobile telephony spectrum (please refer to Section 1.1.4 of this Financial
Report) and the integration of GVT (€411 million) which reflected in 2010 a strong growth in capital expenditures related to the geographical expansion of its
telecommunication network.
Consequently, in 2010, cash flow from operations (CFFO) after capital expenditures, net generated by business segments amounted to €5,212 million
(compared to €5,237 million in 2009), a €25 million decrease (-0.5%). Excluding the impact of spectrum acquisition by SFR, cash flow from operations (CFFO)
generated by business segments increased by 5.3%.
In 2010, income taxes paid, net amounted to €1,365 million (compared to €137 million in 2009), a €1,228 million increase. This increase was primarily driven by the
impact from the utilization by SFR in 2009 of Neuf Cegetel’s tax losses carried forward from prior years, both on income taxes paid, net by SFR (€593 million, net paid
in 2010, compared to a net reimbursement of €76 million in 2009, related to the refund of tax payments for fiscal year 2008) and on the tax payment received by
Vivendi as part of the Consolidated Global Profit Tax System (€182 million received in 2010 with respect to fiscal year 2009, compared to €435 million in 2009 with
respect to fiscal year 2008). In addition, the increase in income taxes paid, net in 2010 reflected the favorable impact in 2009 from the refund of tax payments, net by
UMG and Canal+ with respect to fiscal year 2008, and the impact of GVT’s consolidation since November 13, 2009.
In 2010, financial activities cash payments amounted to €739 million (compared to €425 million in 2009), a €314 million increase. The premium paid in 2010 as
part of the early redeemed borrowings and the accelerated settlement of rate swaps for hedging amounted to €129 million, compared to €53 million in 2009,
a €76 million increase. In addition, foreign currency hedging transactions generated a net cash payment of €87 million in 2010, compared to a net cash inflow of
€95 million in 2009. Finally, interest paid, net amounted to €492 million in 2010 (compared to €458 million in 2009), a €34 million increase. This change was
attributable to the increase in average outstanding borrowings to €12.7 billion in 2010 (compared to €10.2 billion in 2009), primarily resulting from the financing of the
acquisition of GVT (€3.0 billion), offset by the decrease in the average interest rate on borrowings to 4.09% in 2010 (compared to 4.75% in 2009).
As a result, cash flow from operations after interest and income taxes paid (CFAIT) amounted to €3,108 million (compared to €4,675 million in 2009),
a €1,567 million decrease.
139
Section 3 Cash flow from operations analysis
(in millions of euros)
Revenues
Operating expenses excluding depreciation and amortization
EBITDA (a)
Restructuring charges paid
Content investments, net
of which internally developed franchises and other games content assets at Activision Blizzard
of which payments to artists and repertoire owners, net at UMG
Payments to artists and repertoire owners
Recoupment of advances and other movements
of which film and television rights, net at Canal+ Group
Acquisition of film and television rights
Consumption of film and television rights
of which sports rights, net at Canal+ Group
Acquisition of sports rights
Consumption of sports rights
Neutralization of change in provisions included in EBITDA
Other cash operating items excluded from EBITDA
Other changes in net working capital
Net cash provided by operating activities before income tax paid (b)
Dividends received from equity affiliates (c)
of which NBC Universal
Dividends received from unconsolidated companies (c)
Capital expenditures, net (capex, net) (d)
of which SFR
Maroc Telecom Group
GVT
Cash flow from operations (CFFO)
Interest paid, net (e)
Other cash items related to financial activities (e)
of which fees and premium on borrowing issued/redeemed
gains/(losses) on currency transactions
Financial activities cash payments
Payment received from the French State Treasury as part of the Consolidated Global Profit Tax System
Other taxes paid
Income tax (paid)/received, net (b)
Cash flow from operations after interest and income tax paid (CFAIT)
2010
2009
V€
V%
28,878
(20,569)
8,309
(93)
(137)
(83)
27,132
(19,449)
7,683
(190)
(274)
(126)
+1,746
-1,120
+626
+97
+137
+43
+6.4%
-5.8%
+8.1%
+51.1%
+50.0%
+34.1%
(578)
624
46
(624)
584
(40)
+46
+40
+86
+7.4%
+6.8%
na
(700)
671
(29)
(667)
645
(22)
-33
+26
-7
-4.9%
+4.0%
-31.8%
(646)
676
30
(125)
(10)
387
8,331
235
233
3
8,569
(3,357)
(f) (1,974)
(556)
(482)
5,212
(492)
(247)
(129)
(87)
(739)
182
(1,547)
(1,365)
3,108
(712)
636
(76)
(72)
27
315
7,489
306
306
4
7,799
(2,562)
(1,703)
(486)
(71)
5,237
(458)
33
(53)
95
(425)
435
(572)
(137)
4,675
+66
+40
+106
-53
-37
+72
+842
-71
-73
-1
+770
-795
-271
-70
-411
-25
-34
-280
-76
-182
-314
-253
-975
-1,228
-1,567
+9.3%
+6.3%
na
-73.6%
na
+22.9%
+11.2%
-23.2%
-23.9%
-25.0%
+9.9%
-31.0%
-15.9%
-14.4%
na
-0.5%
-7.4%
na
x 2.4
na
-73.9%
-58.2%
x 2.7
x 10
-33.5%
na: not applicable.
(a) EBITDA, a non-GAAP measure, is described in Section 4.2 of this Financial Report.
(b) As presented in operating activities of Vivendi’s Statement of Cash Flows (please refer to Section 5.3).
(c) As presented in investing activities of Vivendi’s Statement of Cash Flows (please refer to Section 5.3).
(d) Consists of capital expenditures, net of proceeds from property, plant and equipment and intangible assets as presented in investing activities of Vivendi’s
Statement of Cash Flows (please refer to Section 5.3).
(e) As presented in financing activities of Vivendi’s Statement of Cash Flows (please refer to Section 5.3).
(f) Notably included the acquisition of 3G spectrum for €300 million in June 2010.
140
Section 4 Business segment performance analysis
4.1. Revenues, EBITA and cash flow from operations by business segment 2
Revenues
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
Non-core operations and others, and elimination of intersegment transactions
Total Vivendi
EBITA
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
Holding & Corporate
Total Vivendi
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
NBC Universal dividends
Holding & Corporate
Total Vivendi
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
NBC Universal dividends
Holding & Corporate
Total Vivendi
na: not applicable.
2. The information presented above takes into account the consolidation of the following entities from the reported dates:
- at Maroc Telecom Group: Sotelma (August 1, 2009); and
- GVT (November 13, 2009).
2010
2009
% Change
% Change at
constant rate
3,330
4,449
12,577
2,835
1,029
4,712
(54)
28,878
3,038
4,363
12,425
2,694
104
4,553
(45)
27,132
+9.6%
+2.0%
+1.2%
+5.2%
na
+3.5%
na
+6.4%
+4.4%
-3.6%
+1.2%
+4.5%
na
+2.9%
na
+4.2%
692
471
2,472
1,284
277
690
(127)
(33)
5,726
484
580
2,530
1,244
20
652
(91)
(29)
5,390
+43.0%
-18.8%
-2.3%
+3.2%
na
+5.8%
-39.6%
na
+6.2%
+40.7%
-23.6%
-2.3%
+2.4%
na
+5.4%
-39.5%
na
+4.5%
2010
2009
% Change
1,248
508
3,952
1,706
413
639
233
(99)
(31)
8,569
1,043
329
3,966
1,659
65
559
306
(100)
(28)
7,799
+19.7%
+54.4%
-0.4%
+2.8%
na
+14.3%
-23.9%
+1.0%
na
+9.9%
1,173
470
1,978
1,150
(69)
410
233
(100)
(33)
5,212
995
309
2,263
1,173
(6)
328
306
(101)
(30)
5,237
+17.9%
+52.1%
-12.6%
-2.0%
na
+25.0%
-23.9%
+1.0%
na
-0.5%
141
4.2. Comments on operating performance of business segments
Preliminary comments: Vivendi Management evaluates the performance of Vivendi’s business segments and allocates the necessary resources to them based
on certain operating performance indicators, notably non-GAAP measures EBITA (Adjusted earnings before interest and income taxes) and EBITDA (Earnings
Before Interest, Taxes, Depreciation and Amortization):
• The difference between EBITA and EBIT consists of the amortization of intangible assets acquired through business combinations and the impairment of
goodwill and other intangibles acquired through business combinations that are included in EBIT. Please refer to Note 1.2.3 to the Consolidated Financial
• As defined by Vivendi, EBITDA is calculated as EBITA as presented in the Adjusted Statement of Earnings, before depreciation and amortization of tangible
and intangible assets, restructuring charges, gains/(losses) on the sale of tangible and intangible assets and other non-recurring items (as presented in
the Consolidated Statement of Earnings by each operating segment - Please refer to Note 3 to the Consolidated Financial Statements for the year ended
December 31, 2010).
Moreover, it should be emphasized that other companies may define and calculate EBITA and EBITDA differently than Vivendi, thereby affecting comparability.
As a reminder, the Vivendi group operates through six businesses at the heart of the worlds of content, platforms and interactive networks; as of December 31, 2010,
Vivendi’s ownership interest in each of these businesses is as follows:
• Activision Blizzard: 61%;
• Universal Music Group (UMG): 100%;
• SFR: 56%;
• Maroc Telecom Group: 53%;
• GVT: 100% (please refer to Section 1.1.1); and
• Canal+ Group: 100% (as from February 22, 2010, Canal+ Group holds an 80% interest in Canal+ France; please refer to Section 1.1.2).
142
4.2.1. Activision Blizzard
IFRS measures, as published by Vivendi3
(in millions of euros, except for margins)
Activision
Blizzard
Distribution
Non-core operations
Total Revenues
Total EBITDA
Activision
Blizzard
Distribution
Non-core operations
Total EBITA
EBITA margin rate (%)
2010
2009
% Change
2,002
1,046
282
3,330
901
187
498
7
692
20.8%
1,173
1,819
922
297
3,038
676
56
420
9
(1)
484
15.9%
995
+10.1%
+13.4%
-5.1%
na
+9.6%
+33.3%
x 3.3
+18.6%
-22.2%
na
+43.0%
+4.9 pts
+17.9%
% Change at
constant rate
+5.5%
+7.1%
-10.8%
na
+4.4%
+30.1%
x 3.7
+11.9%
-30.9%
na
+40.7%
Non-GAAP measures, unaudited, as published by Activision Blizzard
(in millions of US dollars)
Activision
Blizzard
Distribution
Non-GAAP net revenues
Eliminate non-GAAP adjustments:
US GAAP net revenues
Activision
Blizzard
Distribution
Non-GAAP operating income
US GAAP operating income
Net revenues by distribution channel
Retail channel
Digital online channel
Sub-total Activision and Blizzard
Distribution
Total Non-GAAP net revenues
Net revenues by platform mix
MMORPG (massively multiplayer online role-playing game)
PC and other
Console
Hand-held
Sub-total Activision and Blizzard
Distribution
Net revenues by geographic region
North America
Europe
Asia Pacific
2010
2009
% Change
2,769
1,656
378
4,803
(356)
4,447
511
850
10
1,371
(902)
469
3,156
1,196
423
4,775
(496)
4,279
663
555
16
1,234
(1,260)
(26)
-12.3%
+38.5%
-10.6%
+0.6%
+28.2%
+3.9%
-22.9%
+53.2%
-37.5%
+11.1%
+28.4%
na
2,872
1,553
4,425
378
4,803
3,079
1,273
4,352
423
4,775
-6.7%
+22.0%
+1.7%
-10.6%
+0.6%
1,421
406
2,406
192
4,425
378
4,803
1,155
213
2,740
244
4,352
423
4,775
+23.0%
+90.6%
-12.2%
-21.3%
+1.7%
-10.6%
+0.6%
2,575
1,902
326
4,803
2,458
2,022
295
4,775
+4.8%
-5.9%
+10.5%
+0.6%
3. The reconciliation of US GAAP and non-GAAP data published by Activision Blizzard (net revenues and EBITA) to data relating to Activision Blizzard prepared by Vivendi in accordance with IFRS standards is described
in an appendix to this Financial Report (“II – Appendix to Financial Report: Unaudited supplementary financial data”).
143
Revenues and EBITA
Activision Blizzard’s revenues reached €3,330 million, a 9.6% increase compared to the same period in 2009, and EBITA reached €692 million, a 43% increase.
These results were determined using the accounting principles requiring revenues and related cost of sales associated with online component games to be deferred
over the estimated customer service period. The balance of deferred operating margin was €1,024 million as of December 31, 2010, compared to €733 million as of
December 31, 2009.
Activision Blizzard’s new releases Call of Duty ®: Black Ops, Starcraft II ®: Wings of Liberty and World of Warcraft ®: Cataclysm™ were the main driving force of this
strong performance. Revenues from digital channels accounted for over 30% of the Activision Blizzard’s overall revenues.
World of Warcraft ®: Cataclysm™, which was launched on December 7, 2010, sold through more than 3.3 million copies worldwide during its first 24 hours of release,
making it the fastest-selling PC game of all time. As of December 31, 2010, more than 12 million gamers worldwide had subscribed to play World of Warcraft ®4.
In November 2010, Call of Duty ®: Black Ops became the first video game ever to surpass $650 million in retail sales in its first five days of release 5. To date, the game
has achieved more than $1 billion in retail sales worldwide6.
Activision Blizzard continues to invest in opportunities afforded by online gaming worldwide and will reduce its exposure to low-margin and low-potential businesses.
In 2011 and beyond, Activision Blizzard will allocate its resources toward high-margin growth and long term opportunities. New developments include Blizzard
Entertainment’s games, investments in forthcoming Call of Duty ® titles, the development of a digital community surrounding the Call of Duty ® franchise, a new
property from Bungie and an innovative new universe Skylanders Spyro ® ‘s Adventure® that will bring the world of toys, video games and the Internet together in
an unprecedented way.
Activision Blizzard announced a new stock repurchase program under which the company can repurchase up to $1.5 billion of the company’s outstanding common
stock. As of December 31, 2010, Activision Blizzard had purchased an aggregate of 86 million shares of its common stock for approximately $966 million under the
$1 billion 2010 program. As of December 31, 2010, Vivendi held an approximate 61% interest (non-diluted) in Activision Blizzard.
Activision Blizzard also announced a cash dividend of $0.165 per common share with respect to fiscal year 2010, a 10% increase.
Activision Blizzard’s cash flow from operations amounted to €1,173 million, a €178 million increase compared to 2009. This increase reflected the exceptional
commercial results in 2010 as well as favorable movements in working capital.
4. According to Blizzard Entertainment internal data.
5. According to Activision Blizzard internal estimates.
6. According to The NPD Group, Charttrack and Gfk.
144
4.2.2. Universal Music Group (UMG)
Physical sales
Digital music sales
License and others
Recorded music
Music publishing
Artist services & merchandising
Intercompany elimination
Total revenues
EBITDA
Recorded music
Music publishing
Artist services & merchandising
Total EBITA
Restructuring charges
EBITA excluding restructuring charges
Breakdown of recorded music revenues by geographical area
Europe
North America
Asia Rest of the world
2010
2009
% Change
2,128
1,033
415
3,576
662
252
(41)
4,449
571
266
199
6
471
10.6%
(60)
531
470
2,234
908
396
3,538
659
218
(52)
4,363
680
374
208
(2)
580
13.3%
(59)
639
309
-4.7%
+13.8%
+4.8%
+1.1%
+0.5%
+15.6%
+21.2%
+2.0%
-16.0%
-28.9%
-4.3%
na
-18.8%
-2.7 pts
-1.7%
-16.9%
+52.1%
41%
40%
13%
6%
100%
42%
40%
13%
5%
100%
% Change at
constant rate
-10.3%
+7.5%
-0.3%
-4.6%
-4.7%
+10.1%
na
-3.6%
-20.5%
-34.0%
-8.0%
na
-23.6%
Recorded music: Best-selling artists (physical and digital album units sold, in millions)
Artist - Title
Eminem - Recovery
Lady Gaga - The Fame Monster
Taylor Swift - Speak Now
Rihanna - Loud
Justin Bieber - My Worlds
Justin Bieber - My World 2.0
Take That - Progress
Black Eyed Peas - The E.N.D. (The Energy Never Dies)
Bon Jovi - Greatest Hits - The Ultimate Collection
Black Eyed Peas - The Beginning
Total
2010
Units Artist - Title
6.0
4.8
4.3
3.0
3.0
2.9
2.8
2.6
2.4
2.1
33.9
Black Eyed Peas - The End
Taylor Swift - Fearless
Lady Gaga - The Fame
U2 - No Line On The Horizon
Andrea Bocelli - My Christmas
Eminem - Relapse
Lady Gaga - The Fame Monster
Hannah Montana The Movie Soundtrack
Rihanna - Rated R
Miley Cyrus - The Time Of Our Lives
Total
2009
Units
5.4
4.7
4.6
4.3
3.7
3.1
3.0
2.4
2.2
2.1
35.5
145
Revenues and EBITA
Universal Music Group’s (UMG) revenues were €4,449 million, a 2.0% increase compared to 2009 (a 3.6% decrease at constant currency) with the favorable currency
movements and growth in digital sales and merchandising more than offsetting declining physical product sales and slightly lower music publishing activity. Digital
sales increased 13.8% year-on-year.
UMG’s EBITA was €471 million, a 18.8% decline compared to 2009. Changes in sales mix, restructuring costs and write-downs from underperforming investments
offset operating cost savings.
Under the leadership of new CEO Lucian Grainge, UMG has launched a significant reorganization plan leading to cost optimization, redeployment of resources towards
key initiatives such as further expanding the company’s creative investments, including maintaining high investment in local artists and talents, support and
development of new digital platforms and services, and a more global approach. By the end of 2011, cost savings are expected to reach €100 million globally on
a full year basis.
Major 2010 sellers included titles from Eminem, Taylor Swift, and Japan’s Masaharu Fukuyama, in addition to prior year releases from Lady Gaga and Black Eyed Peas.
Vevo’s success is confirmed: 1# online music destination in the United States, it had nearly 60 million unique viewers in December 2010.
UMG continues to lead the music industry in supporting new digital services, recently partnering with Indian telecom Reliance Communications (RCOM) to launch
the first-ever comprehensive music service for that developing market. UMG also continues to expand its global television presence, completing deals with such
ratings leaders as ‘American Idol’ (Fox) in the United States and “The Voice Of…” in Holland and in the United States (NBC).
UMG’s cash flow from operations amounted to €470 million, a €161 million increase compared to 2009. This increase of 52.1% was driven by favourable movements
in working capital and the decrease in content investments, net, which more than offset the decrease in EBITDA.
146
4.2.3. SFR
Mobile service revenues
Equipment sales, net
Mobile
Broadband Internet and Fixed
Total Revenues
Mobile
Broadband Internet and Fixed
Total EBITDA
EBITA
Capital expenditures, net (capex, net) (a)
Of which acquisition of 3G spectrum
capital expenditures, net excluding acquisition of 3G spectrum
Of which acquisition of 3G spectrum
cash flow from operations excluding acquisition of 3G spectrum
Mobile
Customers (in thousands)
Postpaid (b)
Prepaid
Total SFR Group
Wholesale customer base (estimated)
Total SFR Group network
Mobile customer base market share (c)
Network market share (c)
12-month rolling ARPU (in euros/year) (d)
Postpaid
Prepaid
Blended ARPU
Data revenues compared to total mobile service revenues (in %)
Cost of acquisition compared to total mobile service revenues (in %)
Cost of retention compared to total mobile service revenues (in %)
Residential broadband Internet and Fixed
Broadband Internet customer base (in thousands)
Broadband Internet customer base market share (SFR's estimates)
2010
2009
% Change
8,420
510
8,930
3,944
(297)
12,577
3,197
776
3,973
2,472
19.7%
1,974
300
1,674
1,978
(300)
2,278
8,510
473
8,983
3,775
(333)
12,425
3,306
661
3,967
2,530
20.4%
1,703
na 1,703
2,263
na 2,263
-1.1%
+7.8%
-0.6%
+4.5%
+10.8%
+1.2%
-3.3%
+17.4%
+0.2%
-2.3%
- 0.7 pt
+15.9%
na
-1.7%
-12.6%
na
+0.7%
16,095
5,208
21,303
1,256
22,559
33.1%
35.0%
14,807
5,588
20,395
1,039
21,434
33.1%
34.8%
+8.7%
-6.8%
+4.5%
+20.9%
+5.2%
+0.2 pt
506
155
410
532
164
418
-4.9%
-5.5%
-1.9%
27.7%
7.0%
8.7%
23.7%
7.4%
7.6%
+4.0 pts
-0.4 pt
+1.1 pts
4,887
24.3%
4,444
23.6%
+10.0%
0.7 pt
(a) Relates to cash used for capital expenditures, net of proceeds from sales of property, plant and equipment, and intangible assets.
(b) Includes M2M (Machine to Machine) customers.
(c) Source: Arcep.
(d) ARPU (Average Revenue Per User) is defined as revenues net of promotions and net of third-party content provider revenues excluding roaming in
revenues and equipment sales divided by the average ARCEP total customer base for the last twelve months. ARPU excludes M2M (Machine to
Machine) data.
147
Revenues and EBITA
SFR’s revenues were €12,577 million, a 1.2% increase compared to 2009, despite a more competitive market and substantial tariff cuts resulting from regulatory
decisions. Excluding the regulated price cut impacts, revenues increased by 5.8%.
Mobile revenues7 reached €8,930 million, a 0.6% decrease compared to 2009.
Mobile service revenues8 decreased by 1.1% to €8,420 million. Excluding the impact of the 31% and 33% mobile voice termination regulated price cuts on July 1, 2009
and July 1, 2010 respectively, the 33% SMS voice termination regulated price cut on February 1, 2010 and the roaming tariff cuts resulting from regulatory decisions,
mobile service revenues increased by 4.8%.
In 2010, SFR achieved good commercial results, adding almost 1,288,000 new postpaid net adds, in particular due to the success of smartphones and offers including
an Internet remote access. 28% of SFR customers were equipped with a smartphone at the end of December 2010 (compared to 15% at end of 2009) allowing
a data revenue growth of 16% in 2010. At the end of 2010, SFR’s postpaid mobile customer base reached 16.095 million, improving the customer mix by
3.0 percentage points year-on-year to attain 75.6%. SFR’s total mobile customer base reached 21.303 million.
SFR and La Poste entered into an agreement for the launch of a Mobile Virtual Network Operator (MVNO) in the second quarter of 2011 that is expected to become
one of the market leaders.
Broadband Internet and fixed revenues7 were €3,944 million, a 4.5% increase compared to 2009, reflecting an excellent commercial performance from the broadband
Internet mass market segment (for which revenues increased by 11.9%) as well as a dynamic Enterprise segment. SFR added 443,000 net new active broadband
internet residential customers, representing a market share of more than 30%9. At the end of 2010, the broadband Internet residential customers base totaled
4.887 million, a 10.0% increase year-on-year. Additionally, SFR has benefitted from the success of the new neufbox Evolution which was launched on November 16, 2010
and has attracted more than 200,000 customers at the end of February.
SFR reached an important step regarding the fiber-optic deployment with the signature of an agreement with Bouygues Telecom to share their investments and their
fiber horizontal networks in some cities within very concentrated areas.
SFR’s EBITDA was €3,973 million, a 0.2% increase compared to 2009. This growth included €58 million of non-recurring (“non-cash”) items related to the termination
of some of SFR’s fixed network indefeasible right of use (IRU) by third parties.
SFR’s mobile EBITDA was €3,197 million, a 3.3% decrease compared to 2009. Growth in the customer bases, the expansion of mobile Internet and the strict control
of costs did not totally offset the very negative impacts of the regulation and strong competition on the French market.
SFR’s broadband Internet and fixed EBITDA was €776 million, a 17.4% increase compared to 2009. This increase was driven by the effects of broadband Internet
growth and positive non-recurring items. Excluding the impact of those non-recurring items, EBITDA growth was 8.6%.
SFR’s EBITA was €2,472 million, a decrease of 2.3% compared to 2009.
SFR’s cash flow from operations amounted to €1,978 million, a 12.6% decrease compared to 2009. The decrease in CFFO was mainly due to the increase in broadband
Internet and fixed net capital expenditures (reflecting both good commercial performances in ADSL and fiber deployment), and to the acquisition of mobile 3G
spectrum for €300 million in 2010, given that EBITDA was stable (+0.2%). Excluding acquisition of 3G spectrum, SFR’s cash flow from operations amounted to
€2,278 million, stable compared to 2009 (+0.7%).
7. Mobile revenues and broadband Internet and fixed revenues are determined as revenues before elimination of intersegments operations within SFR.
8. Mobile service revenues are determined as mobile revenues excluding revenues from equipment sales, net.
9. According to SFR.
148
4.2.4. Maroc Telecom Group
Maroc Telecom SA
Subsidiaries
Total revenues
EBITDA
Maroc Telecom SA
Subsidiaries
Total EBITA
Capital expenditures, net (capex, net)
Maroc Telecom SA
Number of mobile customers (in thousands)
% of prepaid customers
of which prepaid customers
ARPU (in euros/month)
Postpaid
Prepaid
Total
Churn rate (in %/year)
Postpaid
Prepaid
Total
Number of fixed lines
Number of Internet customers
African subsidiaries (in thousands)
Number of mobile customers
Number of fixed lines
Number of Internet customers
(a) Notably includes Sotelma, consolidated since August 1, 2009.
2010
2009 (a)
% Change
2,345
505
(15)
2,835
1,667
1,183
101
1,284
45.3%
556
1,150
2,288
417
(11)
2,694
1,612
1,162
82
1,244
46.2%
486
1,173
+2.5%
+21.1%
na
+5.2%
+3.4%
+1.8%
+23.2%
+3.2%
- 0.9 pt
+14.4%
-2.0%
16,890
95.2%
16,073
15,272
95.5%
14,590
+10.6%
-0.3 pt
+10.2%
49.7
6.6
8.3
53.7
6.7
8.7
-7.4%
-1.5%
-4.6%
13%
30%
29%
1,231
497
13%
34%
34%
1,234
471
-4 pts
-5 pts
-0.2%
+5.5%
6,834
291
77
4,235
294
56
+61.4%
-1.0%
+37.0%
% Change at
constant rate
+1.7%
+20.4%
na
+4.5%
+2.7%
+1.0%
+22.3%
+2.4%
149
Revenues and EBITA
Maroc Telecom Group’s revenues were €2,835 million, up 5.2% year on year (+2.4% at constant currency and perimeter10) due to the solid performances of its
domestic market and of its subsidiaries in Africa.
Maroc Telecom Group’s customer base was 25.8 million, up 19% compared to the end 2009. This evolution reflected a continuing sustained growth of the mobile
customer base in Morocco (+10.6%) and especially in the African subsidiaries, where it reached over 6.8 million mobile customers, up 58% year-on-year.
Maroc Telecom Group’s EBITDA was €1,667 million, up 3.4% year-on-year (+2.0% at constant currency and perimeter). Its high EBITDA margin rate was maintained
at 58.8% due to the pursuit of growth in revenues and of the very proactive cost optimization policy both in Morocco and in the subsidiaries.
Maroc Telecom Group’s EBITA was €1,284 million, up 3.2% year-on-year (+2.7% at constant currency and perimeter). The EBITA margin rate remained at a high level,
45.3%. Maroc Telecom Group pursues a major investment program, both in Morocco and in the subsidiaries.
Maroc Telecom Group’s cash flow from operations amounted to €1,150 million, a decrease of 2.0% compared to 2009. The €23 million decrease mainly reflected the
14.4% increase in net capital expenditures, notably in African subsidiaries, which was partially offset by the 3.4% increase in EBITDA.
10. Constant perimeter includes the consolidation of Sotelma, as if this transaction had occurred on January 1, 2009.
150
4.2.5. GVT
IFRS measurement, as published by Vivendi
Retail and SME
Corporate
Internet
Total Revenues
EBITDA
EBITA
Capital expenditures, net (capex, net)
Published
2010
798
201
30
1,029
431
277
26.9%
482
(69)
Pro forma (unaudited)
2009 (a)
2009 (b)
% Change
79
21
4
104
40
20
19.2%
71
(6)
453
123
25
601
240
114
19.0%
+76.2%
+63.4%
+20.0%
+71.2%
+79.6%
+143.0%
+7.9 pts
(a) GVT has been consolidated since November 13, 2009: IFRS measurement published for 2009 therefore corresponds to the period between November 13,
2009 and December 31, 2009.
(b) The pro forma 2009 (unaudited) presents IFRS measurement in millions of euros, as though GVT had been consolidated since January 1, 2009.
As measured pursuant to local Brazilian accounting standards
(in millions of BRL, except for margins)
Voice
Next Generation Services
Corporate
Broadband
VoIP
Net Revenues
Region II
Region I & III
Adjusted EBITDA (a)
Adjusted EBITDA margin rate (%)
Number of lines in service (in thousands)
Retail and SME
Voice
Broadband
Corporate
Total
Net New Additions (in thousands of lines)
Retail and SME
Voice
Broadband
Corporate
Total
Revenue by line – Retail (BRL/month)
Voice
Broadband
2010
2009
% Change
1,553
876
207
622
47
2,429
71%
29%
1,003
41.3%
1,159
540
156
345
39
1,699
81%
19%
656
38.6%
+34.0%
+62.2%
+32.7%
+80.3%
+20.5%
+43.0%
-10 pts
+10 pts
+52.9%
+2.7 pts
3,035
1,940
1,095
1,197
4,232
2,085
1,396
689
731
2,816
+45.6%
+39.0%
+58.9%
+63.7%
+50.3%
950
544
406
466
1,416
617
390
227
299
916
+54.0%
+39.5%
+78.9%
+55.9%
+54.6%
67.0
57.6
69.6
49.9
-3.7%
+15.4%
(a) The adjusted EBITDA, a performance measurement used by GVT’s management, is calculated as net income for the period excluding income and social
contribution taxes, financial income and expenses, depreciation, amortization, results of sale and transfer of fixed assets / extraordinary items and stock
option expense.
151
Revenues and EBITA
In IFRS, GVT’s revenues, EBITDA and EBITA, for the full year 2010, were €1,029 million, €431 million and €277 million, respectively. Pro forma, the increase year-onyear was respectively 71.2%, 79.6% and 143.0%. Vivendi took control of and has consolidated GVT since November 13, 2009 and has fully owned its share capital
since April 27, 2010.
In Real, the increase in revenues was 43% driven by an 80.5% increase in broadband service revenues and a 34.0% increase in voice service revenues. Due to GVT’s
competitive value proposition, the net additions of lines in service (LIS) totaled 1.416 million, an increase of 54.6% compared to 2009. As of December 31, 2010, the
total number of the lines reached 4.232 million.
Adjusted EBITDA margin was 41.3%, compared to 38.6% in 2009, which represents a 52.9% increase in adjusted EBITDA in local currency. These changes were due
to a better product mix, including the widespread deployment of 10 Mbps’ and 15 Mbps’ broadband and continued cost optimization.
In 2010, GVT expanded its coverage with 13 additional cities in particular in the States of São Paulo and Rio de Janeiro.
On October 19, 2010, GVT launched Power Music Club powered by UMG, a free access to audio and video services for all GVT Power broadband subscribers.
Additionally, in November 2010, GVT upgraded to 5 Mbps’ its initial speed offer and established the 15 Mbps’ speed as its main offer. For the second consecutive
year, GVT’s broadband was elected as the best broadband in Brazil by the readers of the leading Brazilian tech magazine “Info”.
Since its acquisition by Vivendi, GVT has been accelerating its geographical expansion. For the full year 2010, GVT capital expenditures amounted to €535 million,
compared to €238 million in 2009. And in 2011, GVT’s capital expenditures will reach about €750 million.
GVT’s cash flow from operations amounted to -€69 million. In 2010, net capital expenditures amounted to €482 million, primarily related to investments in network to
cover in regions I and III, notably Rio de Janeiro and São Paulo. GVT’s good operating performance generated cash flow from operations before capital expenditures
(CFFO before capex, net) of €413 million in 2010.
152
4.2.6. Canal+ Group
Canal+ France (a)
Other activities and elimination of intersegment transactions (b)
Total revenues
EBITDA
Canal+ France
Other activities
EBITA
Subscriptions (in thousands)
Pay TV France
Canal+ Overseas (c)
Canal+ France
International (b)
Total Canal+ Group
Churn, per digital subscriber (Mainland France)
ARPU, in euros per individual subscriber (Mainland France)
2010
2009
% Change
3,956
756
4,712
920
616
74
690
14.6%
410
3,837
716
4,553
870
555
97
652
14.3%
328
+3.1%
+5.6%
+3.5%
+5.7%
+11.0%
-23.7%
+5.8%
+ 0.3 pt
+25.0%
9,720
1,338
11,058
1,651
12,709
11.0%
46.3
9,569
1,154
10,723
1,642
12,365
12.3%
44.7
+1.6%
+15.9%
+3.1%
+0.5%
+2.8%
-1.3 pt
+3.6%
% Change at
constant rate
(a) Canal+ France’s revenues are presented before elimination of intersegment transactions within Canal+ Group. Canal+ France notably holds and
consolidates Canal+ SA, Multithematiques, Canal+ Distribution, Kiosque and Canal+ Overseas.
(b) Includes Poland and Vietnam.
(c) Includes overseas territories and Africa. Since 2010, Canal+ Overseas’s subscriber base includes the non-binding subscriptions offered in Africa on
a 12 month equivalent basis. The information presented is consistent with respect to fiscal year 2009.
+3.1%
+1.7%
+2.9%
+5.2%
+11.0%
-27.2%
+5.4%
153
Revenues and EBITA
Canal+ Group reported full year revenues of €4,712 million, which represents a 3.5% increase year-on-year or 2.9% at constant currency. Canal+ Group’s total
subscription base reached 12.7 million as of December 31, 2010, which represents a net increase of 344,000 year-on-year.
Canal+ France revenues were up 3.1% to reach €3,956 million, notably driven by subscription growth, increased revenue per subscriber and higher advertising revenues.
At the end of the year, Canal+ France had 11.1 million subscriptions, which represents a net growth of +335,000 year-on-year. Mainland France saw a net growth
of 151,000 subscriptions year-on-year, reaching 9.7 million mainly due to a reduced digital subscriber churn rate, which stood at 11%, compared to 12.3% at the end of
2009. Average revenue per individual subscriber was up €1.6 year-on-year, reaching €46.3, due to the full effect of price increases implemented in 2009, improved
cross-sell between Canal+ and CanalSat offerings, and a higher penetration of content and service options. Since the analog land signal switch-off in November 2010,
Canal+ subscriber base is now almost 100% digitized. The subscriber base in regions operated by Canal+ Overseas (French overseas territories and Africa) grew by
184,000 to reach 1.3 million due to strong market dynamics, particularly in Africa.
Revenues from other Canal+ Group operations also increased, partly driven by Canal+ in Poland, where subscription revenues grew significantly. StudioCanal’s
revenue decreased slightly. i>Télé channel continued to grow due to a steady increase in advertizing revenues.
Canal+ Group’s EBITA was €690 million, which represents a 5.8% increase year-on-year. Canal+ France’s EBITA was €616 million, or a 11% increase year-on-year.
All pay-TV operations in mainland France and abroad contributed to this growth due to a general increase in the subscription bases combined with overall cost control.
Canal+ Group continued to invest in Vietnam. StudioCanal was impacted by costs related to the release late December 2010 of the film The Tourist, for which most
revenues was accounted in 2011.
Canal+ Group’s cash flow from operations amounted to €410 million, a €82 million increase compared to 2009. The good operating performance of Canal+ France
reflected the increase in cash flow generated through EBITDA (+€50 million). In addition, CFFO also benefited from the favorable movements in changes of net
working capital.
154
4.2.7. Holding & Corporate
EBITA
2010
(127)
(100)
2009
(91)
(101)
EBITA Holding & Corporate EBITA was -€127 million, a €36 million decrease compared to 2009. In 2009, it included a €40 million earn-out income related to the disposal of
real estate assets in Germany in 2007.
Cash flow from operations was stable compared to 2009; it amounted to -€100 million in 2010, compared to -€101 million in 2009. In 2010, CFFO notably included an
increase in net working capital. In 2009, CFFO mainly included the earn-out payment (€40 million) received in connection with the disposal of real estate assets in
Germany in 2007.
4.2.8. Non-core operations and others
Elimination of intersegment transactions
Total Revenues
EBITA
2010
19
(73)
(54)
(33)
(33)
2009
9
(54)
(45)
(29)
(30)
Section 5 Treasury and capital resources
The analysis of Vivendi’s financial position is based on the analysis of changes in the group’s Financial Net Debt, as defined below (please refer to the preliminary
comments below), and the Consolidated Statement of Cash Flows. Cash flow information is useful for a reader’s understanding of Vivendi’s financial statements as it
provides a basis for assessing Vivendi’s ability to generate sufficient cash for its operations as well as its ability to use such cash. The Statement of Cash Flows, when
read together with the other financial statements, provides information that enables readers to assess changes in the group’s net assets and its financial structure
(including its liquidity and solvency). The Statement of Cash Flows reports cash flows resulting from operating, investing and financing activities.
The analysis of Vivendi’s financial position is also based on an analysis of the main characteristics of the group’s financing activities. The following elements are
considered in this analysis:
• Summary of Vivendi’s exposure to credit and liquidity risks (Section 5.1);
• Financial Net Debt changes (Section 5.2);
• Analysis of Financial Net Debt changes (Section 5.3);
• Borrowings put into place/redeemed in 2010 (Section 5.4); and
• Available credit facilities as of February 22, 2011 (Section 5.5).
In addition, a detailed analysis of borrowings (nominal and effective interest rates, maturity), a breakdown of their nominal values by currency, maturity and interest
rate features, as well as main financial covenants and credit ratings are disclosed in Note 22 to the Consolidated Financial Statements. The fair value of
borrowings and the aspects of risk management and financial derivative instruments associated with borrowings are included in Note 23 to the Consolidated
155
Preliminary comments:
• Vivendi considers Financial Net Debt, a non-GAAP measure, to be a relevant indicator in measuring Vivendi’s indebtedness. As of December 31, 2009,
Vivendi revised its definition of Financial Net Debt to include certain cash management financial assets whose characteristics do not strictly comply with the
definition of cash equivalents as defined by the Recommendations of the AMF and by IAS 7 (in particular, these financial assets may have a maturity of up
to 12 months). Considering that no investment in such assets was made prior to 2009, the retroactive application of this change of presentation would have
no impact on Financial Net Debt for the relevant periods. Financial Net Debt is calculated as the sum of long-term and short-term borrowings and other
long-term and short-term financial liabilities as reported on the Consolidated Statement of Financial Position, less cash and cash equivalents as reported
on the Consolidated Statement of Financial Position as well as derivative financial instruments in assets, cash deposits backing borrowings, and certain cash
management financial assets (included in the Consolidated Statement of Financial Position under “financial assets”). Financial Net Debt should be considered
in addition to, and not as a substitute for, other GAAP measures reported on the Consolidated Statement of Financial Position, as well as other measures
of indebtedness reported in accordance with GAAP. Vivendi Management uses Financial Net Debt for reporting and planning purposes, as well as to comply
with certain debt covenants of Vivendi.
• In addition, cash and cash equivalents are not fully available for debt repayments since they are used for several purposes, including but not limited to,
acquisitions of businesses, capital expenditures, dividends, contractual obligations and working capital.
• Furthermore, Vivendi SA centralizes daily cash surpluses (cash pooling) of all controlled entities (a) that do not have significant non-controlling interests and
(b) that are not subject to local regulations restricting the transfer of financial assets or (c) that are not subject to other contractual agreements. Alternatively,
cash surpluses are not pooled by Vivendi SA but rather, as the case may be, distributed either as dividends or used to finance investments of the relevant
subsidiaries, common stock repurchase or to reimburse borrowings used to finance their investments. This situation notably applies to SFR, Maroc Telecom,
and Activision Blizzard. Regarding Activision Blizzard, until July 9, 2013, the distribution of any dividend by Activision Blizzard requires the affirmative vote of
a majority of the independent directors if Activision Blizzard’s Financial Net Debt, after giving effect to such dividend, exceeds $400 million.
5.1. Summary of Vivendi’s exposure to credit and liquidity risks
The main factors considered in assessing Vivendi’s financial position are as follows:
• As of December 31, 2010, the group’s Financial Net Debt amounted to €8.1 billion.
This amount included SFR’s Financial Net Debt of €5.8 billion, of which €2.5 billion was financed by Vivendi SA by way of a grant to SFR of revolving
facilities granted under market terms. The group’s Financial Net Debt also included the net cash position of Activision Blizzard for €2.6 billion as of
December 31, 2010 (including US government agency securities). Please refer to Section 5.2 below;
Vivendi’s credit rating is BBB Stable (Standard & Poor’s and Fitch) and Baa2 Stable (Moody’s) and its “economic” average term11 of the group’s debt
was 4.0 years, compared to 3.9 years at year-end 2009. SFR’s credit rating is BBB+ (Fitch) and its “economic” average term12 of SFR’s debt was 2.6 years,
compared to 2.3 years at year-end 2009. Please refer to Notes 22.8 and 22.9 to the Consolidated Financial Statements for the year ended December
31, 2010; and
The aggregate amount of bonds issued by Vivendi SA and SFR was almost stable compared to December 31, 2009 and amounted to €7.2 billion,
representing approximately 61% of gross borrowings, compared to 62% as of December 31, 2009. The “economic” average term of the bonds issued
by the group was 3.8 years, compared to 4.1 years as of December 31, 2009.
• In 2010, Vivendi SA and SFR each refinanced a credit facility for €1 billion and €1.2 billion, respectively, with initial scheduled maturity dates in 2011;
the two new credit facilities will expire in 2015. Moreover, in March, Vivendi SA placed a €750 million bond issue with a 7-year maturity and in December,
Vivendi SA redeemed a portion of the bond maturing in January 2014 for €226 million (please refer to Section 5.4 below).
• As of February 22, 2011, the date of Vivendi’s Management Board meeting that approved the Financial Statements for the year ended December 31, 2010,
the available undrawn facilities of Vivendi SA, net of commercial paper issued at this date, amounted to €5.7 billion, and available credit lines of SFR, net
of commercial paper issued at this date, amounted to approximately €1.5 billion (please refer to Note 22.4 to the Consolidated Financial Statements for the
year ended December 31, 2010). Under the terms and conditions of their bank facilities, Vivendi SA and SFR are required to comply with certain financial
covenants computed on June 30, and December 31, of each year. These covenants are described in Note 22.6 to the Consolidated Financial Statements
for the year ended December 31, 2010. In the event of non-compliance with such financial covenants, the lenders could require the cancellation or early
repayment of the bank facilities. As of December 31, 2010, Vivendi SA and SFR were in compliance with their financial covenants.
• In addition, the group’s adjusted Financial Net Debt as of December 31, 2010, including cash proceeds of $3.8 billion received from the sale on
January 25, 2011 of the 12.34% remaining interest in NBC Universal and the €1.254 billion proceeds received on January 14, 2011 to end the litigation over
telecommunication assets in Poland amounted to €3.9 billion. Net cash proceeds resulting from these transactions are fully invested in short-term cash
investments (such as SICAV, investment funds, certificates of deposit), that satisfy the criteria of cash equivalents, as defined by AMF and IAS7
recommendations.
11. Considers that all undrawn amounts on available medium-term credit lines may be used to repay group borrowings with the shortest term.
12. Excludes intercompany loans with Vivendi.
156
5.2. Financial Net Debt changes
As of December 31, 2010, Vivendi’s Financial Net Debt amounted to €8,073 million, compared to €9,566 million as of December 31, 2009, a €1,493 million decrease.
This change was notably driven by the $2 billion cash inflow from the sale of 7.66% interest in NBC Universal completed at the end of September 2010 as the initial
step of the sale of 20% interest in NBC Universal for $5.8 billion, as agreed with General Electric in December 2009 (please refer to Section 1.1.1). Furthermore, 72%
of the Financial Net Debt was attributable to SFR, compared to 62% as of December 31, 2009. Finally, Vivendi’s Financial Net Debt also included Activision Blizzard’s
net cash position for €2,632 million (compared to €2,196 million as of December 31, 2009), of which US treasuries and government agency securities with a maturity
exceeding three months for €508 million (compared to €271 million as of December 31, 2009), included in the current short-term Financial Assets items of the
Consolidated Statement of Financial Position.
Borrowings and other financial liabilities
of which long-term (a)
short-term (a)
revolving facilities granted to SFR by Vivendi SA
Derivative financial instruments in assets (b)
Cash deposits backing borrowings (b)
Cash management financial assets (b, c)
Cash and cash equivalents (a)
of which Activision Blizzard’s cash and cash equivalents
Financial Net Debt
Refer to Notes
to the
Consolidated
Financial
Statements
22
22
22
15
15
15
17
December 31, 2010
December 31, 2009
Vivendi
of which SFR
Vivendi
of which SFR
12,003
8,573
3,430
(91)
(21)
(508)
11,383
(3,310)
(2,124)
8,073
5,953
2,134
1,369
2,450
(2)
5,951
(118)
na 5,833
13,262
8,355
4,907
(30)
(49)
(271)
12,912
(3,346)
(1,925)
9,566
6,482
2,211
1,621
2,650
(2)
6,480
(545)
na 5,935
na: not applicable.
(a) As presented in the Consolidated Statement of Financial Position.
(b) Included in the Financial Assets items of the Consolidated Statement of Financial Position.
(c) Relates to US treasuries and government agency securities, with a maturity exceeding three months, at Activision Blizzard.
In 2010, Financial Net Debt decreased by €1,493 million. This decrease mainly reflected:
• the strong cash generated by business segments in 2010 (cash flow from operations before capital expenditures, net for €8,569 million) and the cash inflow
from the sale of 7.66% interest in NBC Universal at the end of September 2010 (€1,425 million);
• partially offset by capital expenditures, net (€3,357 million), by dividends paid to shareowners (€2,674 million, of which €953 million was paid to
subsidiaries’ non-controlling interests), by cash outflows related to income tax paid, net (€1,365 million) and by financial activities (€739 million) as well as
by the stock repurchase program of Activision Blizzard of its common stock (€726 million).
Net cash used for investing activities amounted to €2,534 million, and primarily included capital expenditures, net (€3,357 million, of which €300 million related to
the acquisition by SFR of 3G spectrum), as well as the completion of the acquisition price for 100% of GVT (€576 million, please refer to Section 1.1.1). These cash
payments were notably offset by the $2 billion cash inflow at the end of September 2010 from the sale of a 7.66% interest in NBC Universal (€1,425 million, please
refer to Section 1.1.1) as the first step of the sale of 20% interest in NBC Universal for $5.8 billion, as agreed with General Electric in December 2009, and by
dividends received from NBC Universal (€233 million).
Net cash used for financing activities amounted to €4,761 million, mainly including net payments to Vivendi SA‘s and its subsidiaries’ shareowners (€3,644 million) as
well as the repayments of bank facilities and borrowings (€2,790 million, including the €630 million bond redeemed by Vivendi SA with a maturity date of April 2010),
partially offset by the €750 million bond issue placed by Vivendi SA and the draw-downs on the available credit lines by Vivendi SA (€750 million) and SFR
(€470 million). Payments to the group’s shareowners primarily included the dividend paid by Vivendi SA to its shareowners (€1,721 million), the dividend paid by
consolidated subsidiaries to their non-controlling interests (€953 million, mainly including SFR for €440 million and Maroc Telecom SA for €386 million), the stock
repurchase program of Activision Blizzard (€726 million) and the acquisition of M6’s non-controlling interest in Canal+ France (€384 million).
Net cash provided by operating activities amounted to €6,966 million. For further information about net cash provided by operating activities, please refer to Section 3
“Cash flow from operations analysis” above.
157
Cash and cash
equivalents
Borrowings and other
financial items (a)
Impact on Financial
Net Debt
(3,346)
12,912
9,566
(6,966)
2,534
4,761
(293)
36
(3,310)
(768)
(854)
93
(1,529)
11,383
(6,966)
1,766
3,907
(200)
(1,493)
8,073
Financial Net Debt as of December 31, 2009
Outflows/(inflows) generated by:
Operating activities
Investing activities
Financing activities
Foreign currency translation adjustments (b)
Change in Financial Net Debt over the period
Financial Net Debt as of December 31, 2010
(a) “Other financial items” include commitments to purchase non-controlling interests, derivative financial instruments (assets and liabilities), cash deposits
backing borrowings as well as cash management financial assets.
(b) Primarily relates to the impact of euro/dollar exchange rate fluctuations on Activision Blizzard’s cash and cash equivalents.
5.3. Analysis of Financial Net Debt changes
Year ended December 31, 2010
Refer to
section
EBIT
Adjustments
Gross cash provided by operating activities before income tax paid
Net cash provided by operating activities before income tax paid
Income tax paid, net
Financial investments
Purchases of consolidated companies, after acquired cash
of which completion of the acquisition of GVT
- Payments made to acquire shares that Vivendi did not own as of December 31, 2009
- Foreign exchange hedging gain
- Adjustment in estimate of the purchase price
- Other
Investments in equity affiliates
Increase in financial assets
Total financial investments
Financial divestments
Proceeds from sales of consolidated companies, after divested cash
Disposal of equity affiliates
of which sale of 7.66% interest in NBC Universal for $2 billion
foreign exchange hedging gain related to the sale of 12.34% interest in NBC Universal
Decrease in financial investments
Total financial divestments
Financial investment activities
Dividends received from equity affiliates
Dividends recieved from unconsolidated companies
Investing activities excluding capital expenditures and proceeds from sales of
property, plant, equipment and intangible assets, net
Capital expenditures (a)
Proceeds from sales of property, plant, equipment and intangible assets
Capital expenditures, net
2
3
3
A
1.1
1.1
3
3
B
Impact on
Impact on cash
borrowings and
and cash
equivalents other financial items
Impact on
Financial Net
Debt
(4,871)
(3,210)
137
(7,944)
(387)
(8,331)
1,365
(6,966)
-
(4,871)
(3,210)
137
(7,944)
(387)
(8,331)
1,365
(6,966)
742
576
590
(50)
36
15
640
1,397
(585)
(555)
(590)
50
(15)
(604)
(1,189)
157
21
(15)
36
15
36
208
43
(1,458)
(1,425)
(38)
(567)
(1,982)
(585)
(235)
(3)
421
421
(768)
-
43
(1,458)
(1,425)
(38)
(146)
(1,561)
(1,353)
(235)
(3)
(823)
3,437
(80)
3,357
2,534
(768)
(768)
(1,591)
3,437
(80)
3,357
1,766
Please refer to the next page for the end of this table.
(a) Notably includes the acquisition of 3G spectrum by SFR in June 2010 for €300 million (please refer to Section 1.1.4).
158
Continued from previous page.
Refer to
section
Transactions with shareowners
Net proceeds from issuance of common shares in connection with Vivendi SA’s share-based
compensation plans
of which capital increase subscribed by employees in connection with the stock purchase plan
Other transactions with shareowners
of which exercise by M6 of its put option on its Canal+ France shares
(Sales)/purchases of treasury shares
of which stock repurchase program of Activision Blizzard
Dividends paid by Vivendi SA (€1.40 per share)
Dividends paid by consolidated companies to their non-controlling interests
of which SFR
Maroc Telecom SA
Total transactions with shareowners
Transactions on borrowings and other financial liabilities
Setting up of long-term borrowings and increase in other long-term financial liabilities
of which Vivendi SA
SFR
Principal payments on long-term borrowings and decrease in other long-term financial liabilities
of which Vivendi SA
SFR
Principal payments on short-term borrowings
of which Vivendi SA
SFR
GVT
Other changes in short-term borrowings and other financial liabilities
of which Vivendi SA’s commercial paper
Non-cash transactions
Interest paid, net
Other cash items related to financial activities
Total transactions on borrowings and other financial liabilities
Foreign currency translation adjustments
Change in Financial Net Debt
1.1
1.1
1.1
1.1
5.4
3
3
C
D
A+B
+C+D
Impact on
Impact on cash
borrowings and
and cash
equivalents other financial items
Impact on
Financial Net
Debt
(112)
(98)
356
384
726
726
1,721
953
440
386
3,644
(384)
(384)
(384)
(112)
(98)
(28)
726
726
1,721
953
440
386
3,260
(2,102)
(1,500)
(470)
879
676
185
1,911
863
627
250
(310)
(208)
492
247
1,117
4,761
(293)
2,102
1,500
470
(879)
(676)
(185)
(1,911)
(863)
(627)
(250)
310
208
(92)
(470)
(854)
93
(92)
492
247
647
3,907
(200)
36
(1,529)
(1,493)
5.4. Borrowings put into place/redeemed in 2010
Vivendi SA
• In March, Vivendi SA placed a €750 million bond issue with a 7-year maturity and a 4% coupon. This bond was issued at 99.378%, representing a 4.10%
yield and was primarily aimed at refinancing a €630 million bond issue that matured on April 6, 2010.
• In September, Vivendi SA early refinanced a €1 billion credit facility with an initial scheduled maturity of February 2011. The new credit facility for the same
amount, with a five-year maturity period, was undrawn as of December 31, 2010.
• In December, in order to improve its financial debt position and decrease its financing cost, Vivendi made a partial tender-offer related to the €1.1 billion
bond issued in January 2009 with a 7.75% coupon. Following this offer, Vivendi SA acquired €226 million of bonds, representing a total amount of
€259 million, including premium.
159
SFR
• In January, SFR put into place a new securitization program of €280 million (maturing in January 2015), that was increased to €310 million in July 2010.
• In April, SFR early redeemed the syndicated facility (“Club Deal”) tranche A for €248 million, which had been due to expire in July 2010.
• In June, SFR refinanced the €1.2 billion current credit facility with an initial scheduled maturity of April 2011. The new credit facility for the same amount,
maturing in June 2015, was undrawn as of December 31, 2010.
GVT
• In January and February, the $200 million (€137 million) of bonds issued by GVT in June 2006 at a 12% nominal interest rate with an initial scheduled
maturity of September 2011 were early redeemed in full.
• In July, GVT made an early and partial reimbursement of BRL250 million (approximately €113 million) of the loan granted by BNDES.
5.5. Available credit facilities as of February 22, 2011
As of February 22, 2011, the date of Vivendi’s Management Board meeting that approved the Financial Statements for the year ended December 31, 2010, Vivendi
SA had committed bank facilities in the amount of €6 billion, fully available. Considering the amount of commercial paper issued at this date, and backed on credit
facilities for €0.3 billion, these lines were available in an aggregate amount of €5.7 billion. SFR had available committed bank facilities in the amount of €3.4 billion,
drawn for €1 billion. Considering the amount of commercial paper issued at this date and backed on credit facilities for €0.9 billion, these lines were available for an
aggregate amount of €1.5 billion.
For a detailed analysis of these credit lines as of December 31, 2010 and December 31, 2009, please refer to Note 22.4 to the Consolidated Financial Statements for
the year ended December 31, 2010.
Section 6 Forward looking statements
This Financial Report contains forward-looking statements with respect to Vivendi’s financial condition, results of operations, business, strategy, plans including those
related to acquisitions and divestures, expectations regarding the payment of dividends as well as the anticipated impact of certain litigations. Although Vivendi
believes that such forward-looking statements are based upon reasonable assumptions, such statements are not guarantees of future performance. Actual results
may differ materially from these forward-looking statements as a result of a number of risks and uncertainties, many of which are beyond Vivendi’s control, including,
but not limited to, the risks described in the documents of the group filed with the Autorité des Marchés Financiers (AMF) (the French securities regulator) and which
are also available in English on Vivendi’s website (www.vivendi.com). These forward-looking statements are made as of the date of this Financial Report. 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.
Section 7 Disclaimer
This Financial Report is an English translation of the French version of such report and is provided for informational purposes only. This translation is qualified in its
entirety by the French version, which is available on the company’s website (www.vivendi.com). In the event of any inconsistencies between the French version of this
Financial Report and the English translation, the French version will prevail.
160
II – Appendix to Financial Report: Unaudited supplementary financial data 1. Adjusted net income
Vivendi considers adjusted net income, a non-GAAP measure, to be a relevant indicator of the group’s operating and financial performance. Vivendi Management uses
adjusted net income because it better illustrates the underlying performance of continuing operations by excluding most non-recurring and non-operating items.
Adjusted net income is defined in Note 1.2.3 to the Consolidated Financial Statements for the year ended December 31, 2010.
Reconciliation of earnings attributable to Vivendi shareowners to adjusted net income
2010
Earnings attributable to Vivendi shareowners (a)
Adjustments
Amortization of intangible assets acquired through business combinations
Impairment losses of intangible assets acquired through business combinations (a)
Other financial charges and income (a)
Change in deferred tax asset related to the Consolidated Global Profit Tax System
Non-recurring items related to provision for income taxes (b)
Provision for income taxes on adjustments
Non-controlling interests on adjustments
Adjusted net income
2009
2,198
830
603
252
17
3
102
(320)
(157)
2,698
634
920
795
(292)
572
(352)
(522)
2,585
(a) As presented in the consolidated statement of earnings.
(b) Mainly relates to the cancellation of a credit for the consumption of the deferred tax asset related to the utilization by SFR of Neuf Cegetel’s ordinary tax
losses carried forward from prior years: €43 million for the share attributable to the group and €33 million for the share attributable to the non-controlling
interest in SFR in 2010 (compared to €420 million for the share attributable to the group and €330 million for the share attributable to the non-controlling
interest in SFR in 2009).
Adjusted net income per share
Basic
Adjusted net income (in millions of euros)
Number of shares (in millions)
Weighted average number of shares outstanding restated (b)
Potential dilutive effects related to share-based compensation
Adjusted weighted average number of shares
Adjusted net income per share (in euros)
2010
Diluted
Basic
2009
Diluted
2,698
(a) 2,695
2,585
(a) 2,581
1,232.3
1,232.3
2.19
1,232.3
2.2
1,234.5
2.18
1,203.2
1,203.2
2.15
1,203.2
1.8
1,205.0
2.14
(a) Solely includes the potential dilutive effect related to employee stock option and restricted stock plans of Activision Blizzard for a non significant amount.
(b) Net of treasury shares.
161
2. Reconciliation of Activision Blizzard’s U.S. GAAP revenues and EBITA to IFRS1
As reported below, the reconciliation of Activision Blizzard’s U.S. GAAP revenue and EBITA to IFRS as of December 31, 2010 and December 31, 2009 is based on:
• Activision Blizzard’s data prepared in compliance with U.S. GAAP standards, in US dollars, contained in its annual report on Form 10-K for the year ended
December 31, 2010, available on Activision Blizzard’s website (www.activisionblizzard.com), and non-GAAP measures, published by Activision Blizzard in
its earnings released on February 9, 2011; and
• Data relating to Activision Blizzard established in accordance with IFRS standards, in euros, as published by Vivendi in its Audited Consolidated Financial
Non-GAAP measures of Activision Blizzard
Activision Blizzard provides net revenues, net income, earnings per share, operating margin data and guidance both including (in accordance with US GAAP)
and excluding (non-GAAP) the impact of:
(i) the change in deferred income and related costs of sales, resulting from the deferral of net revenues associated with the company’s significant
online-enabled games (please refer to Note 1.3.4.1 to the Consolidated Financial Statements for the year ended December 31, 2010);
(ii) expenses related to equity-based compensation costs;
(iii) one-time costs related to the business combination of Activision, Inc. and Vivendi Games, Inc. completed in July 2008;
(iv) restructuring charges;
(v) impairment of intangibles through business combinations;
(vi) the amortization of intangibles and the associated changes in cost of sales resulting from purchase price accounting adjustments from the business
combination of Activision and Vivendi Games; and
(vii) the associated tax benefits.
1. Note: For a definition of EBITA, please refer to Section 4.2 of this Financial Report.
II – Appendix to Financial Report: Unaudited supplementary financial data 162
II – Appendix to Financial Report: Unaudited supplementary financial data Reconciliation of Activision Blizzard’s U.S. GAAP revenues and EBITA to IFRS
Reconciliation of U.S. GAAP revenues to IFRS
Non-GAAP Measurement (U.S. GAAP basis):
Non-GAAP Net Revenues (in millions of dollars)
Changes in deferred net revenues (a)
Other (b)
U.S. GAAP Measurement:
Net Revenues in U.S. GAAP (in millions of dollars), as published by Activision Blizzard
Eliminate U.S. GAAP vs. IFRS differences:
IFRS Measurement:
Net Revenues in IFRS (in millions of dollars)
Translate from dollars to euros:
Net Revenues in IFRS (in millions of euros), as published by Vivendi
of which Activision
Blizzard
Distribution
Non-core operations
Reconciliation of U.S. GAAP EBITA to IFRS
Non-GAAP Measurement (U.S. GAAP basis):
Non-GAAP Operating Income/(Loss) (in millions of dollars)
Changes in deferred net revenues and related cost of sales (a)
Equity-based compensation expense
One time costs related to the Vivendi transaction and integration
Restructuring charges (c)
Impairment of intangibles acquired through business combinations
Amortization of intangibles acquired through business combinations and purchase price accounting related adjustments
Other (b)
U.S. GAAP Measurement:
Operating Income/(Loss) in U.S. GAAP (in millions of dollars), as published by Activision Blizzard
Eliminate U.S. GAAP vs. IFRS differences:
Equity-based compensation expense (d)
Impairment of intangibles acquired through business combinations
Amortization of intangibles acquired through business combinations
Restructuring charges (c)
Other
IFRS Measurement:
Operating Income/(Loss) in IFRS (in millions of dollars)
Eliminate items excluded from EBITA:
Impairment of intangible assets acquired through business combinations
Amortization of intangible assets acquired through business combinations (e)
EBITA in IFRS (in millions of dollars)
Translate from dollars to euros:
EBITA in IFRS (in millions of euros), as published by Vivendi
of which Activision
Blizzard
Distribution
Non-core operations
Year ended December 31, (unaudited)
2010
2009
4,803
4,775
(356)
-
(497)
1
4,447
na
4,279
na
4,447
4,279
3,330
2,002
1,046
282
-
3,038
1,819
922
297
-
Year ended December 31, (unaudited)
2010
2009
1,371
1,234
(319)
(131)
(3)
(326)
(123)
-
(383)
(154)
(24)
(23)
(409)
(259)
(8)
469
(26)
7
31
6
(6)
(6)
(37)
13
8
507
(48)
295
123
925
446
269
667
692
187
498
7
-
484
56
420
9
(1)
163
na: not applicable.
(a) Relates to the impact of the change in deferred net revenues, and related costs of sales associated with the company’s significant online-enabled games
(Please refer to Note 1.3.4.1 to the Consolidated Financial Statements for the year ended December 31, 2010):
- As of December 31, 2010, in both U.S. GAAP and IFRS, the net deferral of revenues amounted to $356 million (€260 million) and, after taking into
account related costs of sales, the net deferral of margin from operations amounted to $319 million (€233 million).
- As of December 31, 2010, in both U.S. GAAP and IFRS, the deferred net revenues balance in the Statement of Financial Position amounted to
$1,726 million (€1,303 million), compared to $1,426 million (€991 million) as of December 31, 2009. After taking into account related costs of
sales, the deferred margin balance in the Statement of Financial Position amounted to $1,356 million (€1,024 million) as of December 31, 2010,
compared to $1,054 million (€733 million) as of December 31, 2009.
(b) Relates to the products and operations reported from historical Vivendi Games businesses that were wound-down, exited or divested by Activision
Blizzard as part of its restructuring and integration plans following the merger completed in July 2008 (non-core operations). Prior to July 1, 2009,
non-core operations were managed as a stand-alone operating segment, however, in light of the decreasing significance of non-core operations, as
of that date Activision Blizzard ceased its management as a separate operating segment and consequently Activision Blizzard is no longer providing
separate operating segment disclosure.
(c) Restructuring charges include severance costs, facility exit costs, and balance-sheet write down and exit costs from the cancellation of projects. In IFRS,
accrual for restructuring activities is recorded at the time the company is committed to the restructuring plan. In U.S. GAAP, the corresponding expense
is recorded on the basis of the actual timing of the restructuring activities.
(d) In US GAAP, unlike in IFRS, existing Activision stock options were re-measured at fair value and allocated to the cost of the business combination at the
closing date; hence the incremental fair value recorded in U.S. GAAP is reversed in IFRS, net of costs capitalized.
(e) Reflects amortization of intangible assets and the increase in the fair value of inventories and associated cost of sales, all of which relate to purchase
price accounting adjustments. Increases in the fair value of inventories and associated cost of sales are not excluded from EBITA.
II – Appendix to Financial Report: Unaudited supplementary financial data 164
II – Appendix to Financial Report: Unaudited supplementary financial data 3. Revenues and EBITA by business segment – 2010 and 2009 quarter data2
2010
Revenues
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
Total Vivendi
EBITA
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
Holding & Corporate
Total Vivendi
1st Quarter
ended March 31
2nd Quarter
ended June 30
3rd Quarter
ended Sept. 30
4th Quarter
ended Dec. 31
945
889
3,085
660
214
1,145
(14)
6,924
758
1,011
3,163
722
230
1,182
(8)
7,058
577
1,027
3,131
744
288
1,137
(17)
6,887
1,050
1,522
3,198
709
297
1,248
(15)
8,009
377
68
634
284
43
230
(38)
(8)
1,590
243
91
734
312
55
256
(27)
(11)
1,653
66
85
614
346
71
274
(22)
( 7)
1,427
6
227
490
342
108
(70)
(40)
( 7)
1,056
1st Quarter
ended March 31
2nd Quarter
ended June 30
3rd Quarter
ended Sept. 30
4th Quarter
ended Dec. 31
731
1,026
3,028
640
na
1,119
(14)
6,530
762
983
3,112
665
na
1,139
(13)
6,648
493
969
3,090
694
na
1,110
(9)
6,347
1,052
1,385
3,195
695
104
1,185
(9)
7,607
178
110
610
286
na 254
(37)
(8)
1,393
195
101
686
300
na 218
9
(3)
1,506
33
58
690
319
na 282
(28)
(8)
1,346
78
311
544
339
20
(102)
(35)
(10)
1,145
2009
Revenues
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
Total Vivendi
EBITA
Activision Blizzard
SFR
Maroc Telecom Group
GVT
Canal+ Group
Holding & Corporate
Total Vivendi
na: not applicable.
2. The information presented above takes into account the consolidation of the following entities from the reported dates:
- at Maroc Telecom Group: Sotelma (August 1, 2009); and
- GVT (November 13, 2009).
165
Vivendi Consolidated Financial Statements
In compliance with the assignment entrusted to us by your annual general shareholders’ meetings, we hereby report to you for the year ended December 31, 2010 on:
• the audit of the accompanying consolidated financial statements of Vivendi S.A., hereinafter referred to as “the Company”;
• the justification of our assessments; and
• the specific verifications required by law.
The consolidated financial statements are the responsibility of the management board of your Company. Our role is to express an opinion on the financial statements,
based on our audit.
1. Opinion on the consolidated financial statements
We conducted our audit in accordance with the auditing standards generally applicable in France. Those standards require that we plan and perform our work to
obtain reasonable assurance that the consolidated financial statements are free from material misstatement. An audit involves examining, on a test basis or by other
sampling means, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit has
provided us with sufficient relevant information on which to base our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and results of all the consolidated entities, in
accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union.
Without qualifying our opinion, we draw your attention to Note 27 to the consolidated financial statements, which explains the change in estimate of the provision for
the Securities Class Action recognized as at December 31, 2010.
2. Justification of our assessments
Pursuant to the provisions of Article L.823-9 of the French Commercial Code relating to the justification of our assessments, we draw your attention to the
following matters.
In connection with our assessment of the accounting principles implemented by your Company:
• At each financial year end, your Company performs impairment tests on goodwill and assets with indefinite useful lives, and also assesses whether there
is any indication of impairment of other tangible and intangible assets, according to the methods described in Note 1.3.5.7 to the consolidated financial
statements. We examined the methods used to test for impairment and ensured that Notes 1.3.5.7 and 9 to the consolidated financial statements provided
appropriate disclosures thereon;
• Notes 1.3.8 and 27 to the consolidated financial statements describe the methods used to assess and recognize provisions for litigation. We examined the
methods used by your group to list, calculate and account for such provisions. We also examined the assumptions and data underlying the estimates made
by the Company, and obtained, where appropriate, the estimates of independent experts commissioned by the Company. We also ensured that any
uncertainties regarding estimates of provisions for litigation were disclosed in Notes 1.3.8 and 27 to the consolidated financial statements. In compliance
with paragraph 92 of IAS 37 such disclosures were limited, as they concerned information that might be detrimental to the Company. As stated in Note
1.3.1 to the consolidated financial statements, facts and circumstances may lead to changes in estimates and assumptions which could have an impact
upon the reported amount of the provisions.
Our assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the formation of the opinion
expressed in the first part of this report.
3. Specific verifications
We also verified the information provided in the group management report, as required by law.
We have no matters to report regarding its fair presentation and conformity with the consolidated financial statements.
Paris-La Defense and Neuilly-sur-Seine, February 28, 2011
Salustro Reydel
Frédéric Quélin
Partner
Jean-Yves Jégourel
Partner
III – Consolidated Financial Statements for the year ended December 31, 2010
166
Note
Revenues
Cost of revenues
Selling, general and administrative expenses
Impairment losses of intangible assets acquired through business combinations
Earnings before interest and income taxes (EBIT)
Interest
Earnings from continuing operations before provision for income taxes
Earnings from continuing operations
Earnings
Of which
Earnings from continuing operations attributable to Vivendi shareowners per share - basic
Earnings from continuing operations attributable to Vivendi shareowners per share - diluted
Earnings attributable to Vivendi shareowners per share - basic
Earnings attributable to Vivendi shareowners per share - diluted
In millions of euros, except per share amounts, in euros.
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
4
4
3
14
5
5
6.2
7
7
7
7
2010
2009
28,878
(14,561)
(9,059)
(135)
(252)
4,871
195
(492)
7
(17)
4,564
(1,042)
3,522
3,522
27,132
(13,627)
(8,703)
(46)
(920)
3,836
171
(458)
7
(795)
2,761
(675)
2,086
2,086
2,198
1,324
1.78
1.78
1.78
1.78
830
1,256
0.69
0.69
0.69
0.69
167
Earnings
Assets available for sale
Cash flow hedge instruments
Net investment hedge instruments
Tax
Unrealized gains/(losses)
Other impacts, net
Charges and income directly recognized in equity
Total comprehensive income
of which
Total comprehensive income attributable to Vivendi shareowners
Total comprehensive income attributable to non-controlling interests
Note
8
2010
2009
3,522
1,794
2
41
(20)
(9)
14
(6)
1,802
5,324
2,086
(325)
8
(44)
(19)
9
(46)
(33)
(404)
1,682
3,880
1,444
407
1,275
168
ASSETS
Goodwill
Non-current content assets
Other intangible assets
Property, plant and equipment
Non-current financial assets
Deferred tax assets
Non-current assets
Inventories
Current tax receivables
Current content assets
Trade accounts receivable and other
Current financial assets
Cash and cash equivalents
Assets held for sale
Current assets
TOTAL ASSETS
EQUITY AND LIABILITIES
Share capital
Additional paid-in capital
Treasury shares
Retained earnings and other
Vivendi shareowners' equity
Total equity
Non-current provisions
Long-term borrowings and other financial liabilities
Deferred tax liabilities
Other non-current liabilities
Non-current liabilities
Current provisions
Short-term borrowings and other financial liabilities
Trade accounts payable and other
Current tax payables
Liabilities associated with assets held for sale
Current liabilities
Total liabilities
TOTAL EQUITY AND LIABILITIES
Note
December 31, 2010
December 31, 2009
9
10
11
12
14
15
6
25,345
2,784
4,408
8,217
2,906
496
1,836
45,992
750
576
1,032
6,711
622
3,310
13,001
13,001
58,993
24,516
3,196
4,342
7,264
4,146
476
1,843
45,783
777
284
1,004
6,467
464
3,346
12,342
12,342
58,125
6,805
8,128
(2)
9,127
24,058
4,115
28,173
1,477
8,573
956
1,074
12,080
552
3,430
14,451
307
18,740
18,740
30,820
58,993
6,759
8,059
(2)
7,201
22,017
3,971
25,988
2,090
8,355
1,104
1,311
12,860
563
4,907
13,567
239
19,276
1
19,277
32,137
58,125
6
10
16
15
17
18
19
22
6
16
19
22
16
6
169
EBIT
Adjustments
Gross cash provided by operating activities before income tax paid
Net cash provided by operating activities before income tax paid
Income tax paid, net
Net cash provided by operating activities
Capital expenditures
Purchases of consolidated companies, after acquired cash
Increase in financial assets
Investments
Proceeds from sales of consolidated companies, after divested cash
Disposal of equity affiliates
Decrease in financial assets
Divestitures
Dividends received from equity affiliates
Dividends received from unconsolidated companies
Net cash provided by/(used for) investing activities
Net proceeds from issuance of common shares in connection with Vivendi SA's share-based compensation plans
Other transactions with shareowners
Sales/(purchases) of treasury shares
Dividends paid in cash by Vivendi SA to its shareowners
Dividends and reimbursements of contribution of capital paid by consolidated companies to their non-controlling interests
Transactions with shareowners
Setting up of long-term borrowings and increase in other long-term financial liabilities
Principal payment on long-term borrowings and decrease in other long-term financial liabilities
Principal payment on short-term borrowings
Other changes in short-term borrowings and other financial liabilities
Interest paid, net
Other cash items related to financial activities
Transactions on borrowings and other financial liabilities
Net cash provided by/(used for) financing activities
Change in cash and cash equivalents
At beginning of the period
At end of the period
Note
24.1
10
2
14
15
14
15
14
21
18
18
18
22
22
22
22
5
2010
2009
4,871
3,210
(137)
7,944
387
8,331
(1,365)
6,966
3,836
3,612
(274)
7,174
315
7,489
(137)
7,352
(3,437)
(742)
(15)
(640)
(4,834)
80
(43)
1,458
567
2,062
235
3
(2,534)
(2,648)
(2,682)
(9)
(359)
(5,698)
86
15
82
183
306
4
(5,205)
112
(356)
(726)
(1,721)
(953)
(3,644)
2,102
(879)
(1,911)
310
(492)
(247)
(1,117)
(4,761)
293
(36)
73
(723)
(792)
(735)
(786)
(2,963)
3,240
(2,817)
(449)
1,452
(458)
33
1,001
(1,962)
9
194
3,346
3,310
3,152
3,346
170
Capital
Common shares
(in millions of euros, except number of shares)
BALANCE AS OF DECEMBER 31, 2009
Attributable to Vivendi SA shareowners
Attributable to non-controlling interests
Contributions by/distributions to Vivendi SA
shareowners
Capital increase related to Vivendi SA sharebased compensation plans
of which Vivendi Employee Stock Purchase Plans
(July 29, 2010)
Changes in Vivendi SA ownership interest in
its subsidiaries that do not result in a loss of
control
of which Activision Blizzard’s stock repurchase
program
Changes in equity attributable to Vivendi SA
shareowners (A)
Contributions by/distributions to noncontrolling interests
of which dividends paid by subsidiaries to noncontrolling interests
Changes in non-controlling interests that
result in a gain/(loss) of control
Changes in non-controlling interests that do
not result in a gain/(loss) of control
program
Changes in equity attributable to non-controlling
interests (B)
Earnings
Charges and income directly recognized
in equity
Total comprehensive income (C)
Total changes over the period (A+B+C)
Note
Number of
Additional
shares (in
paid-in Treasury
thousands) Amounts
capital Shares
Subtotal
Net
Foreign
unrealized
currency
gains/ translation
Retained
(losses) adjustments
earnings
Subtotal
Total
equity
1,228,859
1,228,859
-
6,759
6,759
-
8,059
8,059
-
(2)
(2)
-
14,816
14,816
-
13,333
9,379
3,954
(81)
(55)
(26)
(2,080)
(2,123)
43
11,172
7,201
3,971
25,988
22,017
3,971
18
8,478
-
46
-
69
-
-
115
-
(1,682)
(1,721)
-
-
(1,682)
(1,721)
(1,567)
(1,721)
21
8,478
46
69
-
115
39
-
-
39
154
7,141
39
59
-
98
-
-
-
-
98
-
-
-
-
-
(272)
-
-
(272)
(272)
-
-
-
-
-
(318)
-
-
(318)
(318)
8,478
46
69
-
115
(1,954)
-
-
(1,954)
(1,839)
-
-
-
-
-
(952)
-
-
(952)
(952)
-
-
-
-
-
(952)
-
-
(952)
(952)
-
-
-
-
-
3
-
-
3
3
-
-
-
-
-
(351)
-
-
(351)
(351)
-
-
-
-
-
(409)
-
-
(409)
(409)
-
-
-
-
-
(1,300)
3,522
-
-
(1,300)
3,522
(1,300)
3,522
8,478
8,478
1,237,337
1,237,337
-
46
46
6,805
6,805
-
69
69
8,128
8,128
-
(2)
(2)
-
(6)
3,516
115
262
115
241
21
14,931 (a) 13,595
14,931
9,620
3,975
14
14
14
8
6
(67)
(47)
(20)
1,794
1,794
1,794
1,677
117
(286)
(446)
160
1,802
5,324
2,070
1,926
144
13,242
9,127
4,115
1,802
5,324
2,185
2,041
144
28,173
24,058
4,115
18
18
18
8
(a) Mainly includes previous years’ earnings which were not distributed and 2010 comprehensive income.
171
Capital
Common shares
(in millions of euros, except number of shares)
Contributions by/distributions to Vivendi SA
shareowners
of which capital increase related to dividends
paid in shares
paid in cash
Capital increase related to Vivendi SA sharebased compensation plans
of which Vivendi Employee Stock Purchase Plans
(July 30, 2009)
Changes in Vivendi SA ownership interest in
its subsidiaries that do not result in a loss of
control
program
Changes in equity attributable to Vivendi SA
shareowners (A)
Contributions by/distributions to noncontrolling interests
of which dividends paid by subsidiaries to noncontrolling interests
Changes in non-controlling interests that
result in a gain/(loss) of control
of which goodwill of Sotelma non-controlling
interests
Changes in non-controlling interests that do
not result in a gain/(loss) of control
program
Changes in equity attributable to non-controlling
interests (B)
Earnings
Charges and income directly recognized
in equity
Total comprehensive income (C)
Total changes over the period (A+B+C)
Number of
Additional
shares (in
paid-in Treasury
capital Shares
Note thousands) Amounts
21
18
18
8
Net
Foreign
unrealized
currency
gains/ translation
Sub- Retained
(losses) adjustments
total earnings
Subtotal
Total
equity
1,170,197
1,170,197
-
6,436
6,436
-
7,406
7,406
-
(2)
(2)
-
13,840
13,840
-
14,576
10,460
4,116
(35)
(17)
(18)
(1,755)
(1,768)
13
12,786
8,675
4,111
26,626
22,515
4,111
58,662
53,185
323
293
653
611
-
976
904
(1,604)
(1,639)
-
-
(1,604)
(1,639)
(628)
(735)
53,185
-
293
-
611
-
-
904
-
(904)
(735)
-
-
(904)
(735)
(735)
5,477
30
42
-
72
35
-
-
35
107
4,862
27
44
-
71
-
-
-
-
71
-
-
-
-
-
(277)
-
-
(277)
(277)
-
-
-
-
-
(310)
-
-
(310)
(310)
58,662
323
653
-
976
(1,881)
-
-
(1,881)
(905)
-
-
-
-
-
(1,210)
-
-
(1,210)
(1,210)
-
-
-
-
-
(1,225)
-
-
(1,225)
(1,225)
-
-
-
-
-
190
-
-
190
190
-
-
-
-
-
206
-
-
206
206
-
-
-
-
-
(395)
-
-
(395)
(395)
-
-
-
-
-
(482)
-
-
(482)
(482)
-
-
-
-
-
(1,415)
2,086
-
-
(1,415)
2,086
(1,415)
2,086
58,662
58,662
1,228,859
1,228,859
-
323
323
6,759
6,759
-
653
653
8,059
8,059
-
(2)
(2)
-
976
976
14,816
14,816
-
(33)
2,053
(1,243)
(1,081)
(162)
13,333
9,379
3,954
(46)
(46)
(46)
(38)
(8)
(81)
(55)
(26)
(325)
(325)
(325)
(355)
30
(2,080)
(2,123)
43
(404)
1,682
(1,614)
(1,474)
(140)
11,172
7,201
3,971
(404)
1,682
(638)
(498)
(140)
25,988
22,017
3,971
Note 1. Accounting policies and valuation methods
174
Note 6. Income taxes
201
1.1.
1.2.
1.2.1.
1.2.2.
1.2.3.
174
174
174
174
6.1.
6.2.
6.3.
201
202
Compliance with accounting standards
Presentation of the Consolidated Financial Statements
Presentation of the Consolidated Statement of Earnings
Presentation of the Consolidated Statement of Cash Flows
Presentation of the operating performance of each
operating segment and of the group
1.2.4. Presentation of the Consolidated Statement of Financial Position
1.3. Principles governing the preparation of the
Consolidated Financial Statements
1.3.1. Use of estimates
1.3.2. Principles of consolidation
1.3.3. Foreign currency translation
1.3.4. Revenues from operations and associated costs
1.3.5. Assets
1.3.6. Assets held for sale and discontinued operations
1.3.7. Financial liabilities
1.3.8. Other liabilities
1.3.9. Deferred taxes
1.3.10. Share-based compensation
1.4. Contractual obligations and contingent assets and liabilities
1.5. New IFRS standards and IFRIC interpretations that
have been published but are not yet effective
Note 2. Changes in the scope of consolidation in
2010 and 2009
2.1.
2.2.
2.3.
2.4.
Acquisition of 100% of GVT (Holding) S.A. in Brazil
Sale of NBC Universal
Acquisition of a 51 % interest in Sotelma by
Maroc Telecom in July 2009
Agreements to end litigation over telecommunication
assets in Poland
175
175
176
176
177
177
178
180
185
185
186
187
188
189
202
203
203
205
Note 7. Earnings per share
205
Note 8. Charges and income directly recognized in equity
206
Note 9. Goodwill
207
Note 10. Content assets and commitments
211
10.1. Content assets
10.2. Contractual content commitments
211
213
Note 11. Other intangible assets
214
Note 12. Property, plant and equipment
215
Note 13. Intangible and tangible assets of
telecom operations
216
Note 14. Investments in equity affiliates
217
Note 15. Financial assets
218
Note 16. Net working capital
219
Note 17. Cash and cash equivalents
220
Note 18. Equity
220
Note 19. Provisions
222
189
190
190
192
192
193
Note 3. Segment data
194
3.1.
3.2.
194
198
Operating segment data
Geographical information
6.4.
6.5.
6.6.
Consolidated global profit tax system
Provision for income taxes and income tax paid by
geographical area
Effective tax rate
Deferred tax assets and liabilities
Tax audits
Note 4. EBIT
199
Note 5. Financial charges and income
200
Note 20. Employee benefits
223
20.1. Analysis of expenses related to employee benefit plans
20.2. Employee defined benefit plans
20.2.1. Assumptions used in the evaluation and sensitivity analysis
20.2.2. Analysis of the expense recorded and benefits paid
20.2.3. Analysis of net benefit obligations with respect to
pensions and post-retirement benefits
20.2.4. Additional information on pension benefits in France
223
223
223
225
225
227
Note 21. Share-based compensation plans
228
21.1. Impact of the expense related to share-based
compensation plans
21.2. Plans granted by Vivendi
21.2.1. Information on plans granted by Vivendi
21.2.2. Information on outstanding Vivendi plans
21.3. Plans granted by Activision Blizzard
21.3.1. Information on plans granted by Activision Blizzard
21.3.2. Information on outstanding Activision Blizzard plans
21.3.3. Blizzard (Activision Blizzard subsidiary) long-term incentive plan
21.4. UMG long-term incentive plan
21.5. Neuf Cegetel restricted stock plans
228
228
228
232
233
233
236
236
237
237
Note 22. Borrowings and other financial liabilities
238
22.1. Analysis of long-term borrowings and other
financial liabilities
22.2. Analysis of short-term borrowings and other
financial liabilities
22.3. Nominal value of borrowings by nature of interest rate
and by currency
22.4. Available bank credit facilities of Vivendi SA and SFR
22.5. Future minimum contractual payments related to
borrowings and other financial liabilities
22.6. Description of main financial covenants
22.7. Intercompany loans
22.8. Average maturity
22.9. Vivendi and SFR credit ratings
22.10. Financial Net Debt of SFR and Maroc Telecom Group,
and net cash position of Activision Blizzard
238
239
240
241
242
243
244
244
245
245
Note 23. Financial instruments and management of
market risks
245
23.1. Fair value of financial instruments
23.2. Management of market risks and financial
derivative instruments
23.2.1. Interest rate risk management
23.2.2. Foreign currency risk management
23.2.3. Liquidity risk management
23.3. Credit and investment concentration risk
and counterparty risk management
23.4. Sensitivity of foreign currency translation risk of
Financial Statements
23.5. Equity market risk management
245
253
253
Note 24. Consolidated Cash Flow Statement
253
24.1. Adjustments
24.2. Investing and financing activities with no cash impact
253
253
Note 25. Transactions with related parties
254
25.1. Compensation of directors and officers
25.2. Other related parties
254
255
Note 26. Contractual obligations and other commitments
256
26.1. Contractual obligations and commercial commitments
26.1.1. Off balance sheet commercial commitments
26.1.2. Off balance sheet operating leases and subleases
26.2. Other commitments given or received relating to operations
26.3. Share purchase and sale commitments
26.4. Contingent assets and liabilities subsequent to given or
received commitments related to the divestiture or
acquisition of shares
26.5. Shareholders’ agreements
26.6. Collaterals and pledges
256
257
257
258
258
Note 27. Litigation
262
Note 28. Major consolidated entities or entities accounted
under equity method
268
Note 29. Statutory auditors fees
270
Note 30. Subsequent events
270
247
248
249
251
252
259
261
262
174
Vivendi is a limited liability company (société anonyme) incorporated under French law, subject to French commercial company law and, in particular, the French
Commercial Code (Code de commerce). Vivendi was incorporated on December 18, 1987, for a term of 99 years expiring on December 17, 2086, except in the event of
an early dissolution or unless the term is extended. Its registered office is located at 42 avenue de Friedland – 75008 Paris (France). Vivendi is listed on Euronext Paris
(Compartment A).
Vivendi is at the heart of the worlds of content, platforms and interactive networks and combines the world’s leader in video games (Activision Blizzard), the world’s
leader in music (Universal Music Group), the French leader in alternative telecoms (SFR), the Moroccan leader in telecoms (Maroc Telecom Group), the leading
alternative telecoms provider in Brazil (GVT) and the French leader in pay-TV (Canal+ Group).
The Consolidated Financial Statements reflect the financial and accounting situation of Vivendi and its subsidiaries (the “group”), together with interests in equity
affiliates. Amounts are reported in euros and all values are rounded to the nearest million.
On February 22, 2011, during a meeting held at the headquarters of the company, the Management Board approved the Annual Financial Report and the Consolidated
Financial Statements for the year ended December 31, 2010. Having considered the Audit Committee’s recommendation given at its meeting held on February 24,
2011, the Supervisory Board, at its meeting held on February 28, 2011, reviewed the Annual Financial Report and the Consolidated Financial Statements for the year
ended December 31, 2010, as approved by the Management Board on February 22, 2011.
On April 21, 2011, the Consolidated Financial Statements for the year ended December 31, 2010 will be submitted for approval at Vivendi’s Annual General
Shareholders’ meeting.
Note 1. Accounting policies and valuation methods
1.1. Compliance with accounting standards
The Consolidated Financial Statements of Vivendi SA have been prepared in accordance with International Financial Reporting Standards (IFRS) and International
Financial Reporting Interpretations Committee (IFRIC) interpretations as endorsed by the European Union (EU) with mandatory application as of December 31, 2010.
These standards and interpretations, as applied to Vivendi’s financial statements, do not differ from the applicable standards published by the International
Accounting Standards Board (IASB).
As a reminder, Vivendi opted for the early application of the revised standards IFRS 3 – Business Combinations, and IAS 27 – Consolidated and Separate Financial
Statements, to its Consolidated Financial Statements for the year ended December 31, 2009.
1.2. Presentation of the Consolidated Financial Statements
1.2.1. Presentation of the Consolidated Statement of Earnings
The main line items presented in the Consolidated Statement of Earnings of Vivendi are revenues, income from equity affiliates, interest, provision for income taxes,
earnings from discontinued operations and earnings. The Consolidated Statement of Earnings presents a subtotal for Earnings Before Interest and Tax (EBIT) which
corresponds to the difference between charges and income that do not result from financing activities, equity affiliates, discontinued operations and income taxes.
The charges and income related to financing activities consist of interest, income from investments, as well as other financial charges and income, as presented
in Note 5:
• interest includes interest expense on borrowings and interest income from cash and cash equivalents;
• income from investments includes dividends and interest received from unconsolidated companies; and
• other financial charges and income include losses and gains related to financing activities (excluding interest) and to financial investing activities (excluding
income from investments). In respect of financing activities, they include losses and gains recognized due to changes in equity attributable to Vivendi SA
shareowners or to non-controlling interests, as well as losses and gains related to the change in value of financial assets and to the extinction or the
change in value of financial liabilities. In respect of financial investing activities, they include losses and gains recognized through business combinations,
losses and gains related to divestitures or to the change in value of financial investments, as well as losses and gains related to a gain or loss of control in
a business.
1.2.2. Presentation of the Consolidated Statement of Cash Flows
Net cash provided by operating activities is calculated using the indirect method based on EBIT. EBIT is adjusted for non-cash items and changes in net working
capital. Net cash provided by operating activities excludes the cash impact of financial charges and income and net changes in working capital related to property,
plant and equipment, and intangible assets.
175
Net cash used for investing activities
Net cash used for investing activities includes changes in net working capital related to property, plant and equipment, and intangible assets as well as cash received
from investments (particularly dividends received from equity affiliates). It also includes any cash flows from obtaining or losing control of subsidiaries.
Net cash used for financing activities
Net cash used for financing activities includes net interest paid on borrowings, cash and cash equivalents, bank overdrafts, as well as the cash impact of other items
related to financing activities such as premiums from the early redemption of borrowings and the settlement of derivative instruments. It also includes cash flows from
changes in the level of ownership interest in a subsidiary that do not result in a loss of control (including increases in ownership interests).
1.2.3. Presentation of the operating performance of each operating segment and of the group
Vivendi Management evaluates the performance of the operating segments and allocates to them the necessary resources based on certain operating indicators
(segment earnings and cash flow from operations).
EBITA
Vivendi considers EBITA, a non-GAAP measure, to be the measure of its operating segments performance as reported in the segment data. The method used in calculating
EBITA excludes the accounting impact of the amortization of intangible assets acquired through business combinations. This enables Vivendi to measure and compare the
operating performance of operating segments regardless of whether their performance is driven by the operating segment’s organic growth or acquisitions.
The difference between EBITA and EBIT consists of the amortization of intangible assets acquired through business combinations and the impairment losses of goodwill
and other intangibles acquired through business combinations that are included in EBIT.
Adjusted net income
Vivendi considers adjusted net income, a non-GAAP measure, to be a relevant indicator of the group’s operating and financial performance. Vivendi Management uses
adjusted net income because it better illustrates the underlying performance of continuing operations by excluding most non-recurring and non-operating items.
Adjusted net income includes the following items: EBITA (**), income from equity affiliates (*) (**), interest (*) (**), income from investments (*) (**) and taxes and
non-controlling interests related to these items.
It does not include the following items: impairment losses of goodwill and other intangibles acquired through business combinations (*) (**); the amortization of
intangibles acquired through business combinations (**); other financial charges and income (*) (**); earnings from discontinued operations (*) (**); provisions for income
taxes and adjustments attributable to non-controlling interests and non-recurring tax items (notably the changes in deferred tax assets pursuant to the Consolidated
Global Profit Tax System and the reversal of tax liabilities relating to risks extinguished over the period).
Cash Flow From Operations (CFFO)
Vivendi considers Cash Flow From Operations, a non-GAAP measure, to be a relevant indicator of the group’s operating and financial performance.
The CFFO includes net cash provided by operating activities, before income tax paid, as presented in the Statement of Cash Flows, as well as dividends received from
equity affiliates and unconsolidated companies. It also includes capital expenditures, net that relate to cash used for capital expenditures, net of proceeds from sales of
property, plant and equipment, and intangible assets.
The difference between CFFO and net cash provided by operating activities, before income tax consists of dividends received from equity affiliates and unconsolidated
companies and capital expenditures, net, which are included in net cash used for investing activities and of income tax paid, net which are excluded from CFFO.
1.2.4. Presentation of the Consolidated Statement of Financial Position
Assets and liabilities that are expected to be realized within, or intended for sale or consumption, within the entity’s normal operating cycle (generally 12 months), are
recorded as current assets or liabilities. If their maturity exceeds this period, they are recorded as non-current assets or liabilities. Certain reclassifications have been
made to the 2009 and 2008 consolidated financial statements to conform to the 2010 and 2009 presentation.
(*) Items as presented in the Consolidated Statement of Earnings; (**) Items as reported by each operating segment.
176
1.3. Principles governing the preparation of the Consolidated Financial Statements
Pursuant to IFRS principles, the Consolidated Financial Statements have been prepared on a historical cost basis, with the exception of certain assets and liabilities
detailed below.
The Consolidated Financial Statements include the financial statements of Vivendi and its subsidiaries after eliminating intragroup items and transactions. Vivendi has
a December 31 year-end. Subsidiaries that do not have a December 31 year-end prepare interim financial statements at that date, except when their year-end falls
within the three months prior to December 31.
Acquired subsidiaries are included in the Consolidated Financial Statements of the group from the date of acquisition.
1.3.1. Use of estimates
The preparation of Consolidated Financial Statements in compliance with IFRS requires group management to make certain estimates and assumptions that they
consider reasonable and realistic. Even though these estimates and assumptions are regularly reviewed by Vivendi Management based, in particular, on past or
anticipated achievements, facts and circumstances may lead to changes in these estimates and assumptions which could have an impact upon the reported amount
of group assets, liabilities, equity or earnings.
The main estimates and assumptions relate to the measurement of:
• revenue recognition: estimates of provisions for returns and price guarantees, and rewards as part of loyalty programs deducted from certain revenue
items (please refer to Note 1.3.4);
• Activision/Blizzard revenue: estimates of the service period over which revenue from the sale of boxes for video-games with significant online functionality
is recognized (please refer to Note 1.3.4.1);
• provisions: risk estimates, performed on an individual basis, noting that the occurrence of events during the course of procedures may lead to
a reassessment of the risk at any time (please refer to Notes 1.3.8 and 19);
• employee benefits: assumptions are updated annually, such as the probability of employees remaining with the group until retirement, expected changes in
future compensation, the discount rate and the inflation rate (please refer to Notes 1.3.8 and 20);
• share-based compensation: assumptions are updated annually, such as the estimated term, volatility and the estimated dividend yield (please refer to
Notes 1.3.10 and 21);
• certain financial instruments: fair value estimates (please refer to Notes 1.3.5.8, 1.3.7 and 23);
• deferred taxes: estimates concerning the recognition of deferred tax assets, are updated annually with factors such as expected tax rates and future tax
results of the group (please refer to Notes 1.3.9 and 6);
• goodwill and other intangible assets: valuation methods adopted for the identification of intangible assets acquired through business combinations (please
refer to Notes 1.3.5.2 and 2);
• goodwill, indefinite useful life of intangible assets and assets in progress: assumptions are updated annually relating to impairment tests performed on
each of the group’s cash-generating units (CGUs) determined by future cash flows and discount rates (please refer to Notes 1.3.5.7, 9, 11 and 12);
• Activision Blizzard content assets: estimates of the future performance of franchises and other content assets related to games recognized in the
Statement of Financial Position (please refer to Notes 1.3.5.3 and 10); and
• UMG content assets: estimates of the future performance of beneficiaries who were granted advances recognized in the Statement of Financial Position
(please refer to Notes 1.3.5.3 and 10).
177
1.3.2. Principles of consolidation
A list of Vivendi’s major subsidiaries, joint ventures and associated entities is presented in Note 28.
Consolidation
All companies in which Vivendi has a controlling interest, namely those in which it has the power to govern financial and operational policies in order to obtain benefits
from their operations, are fully consolidated.
A controlling position is deemed to exist when Vivendi holds, directly or indirectly, a voting interest exceeding 50% of total voting rights in an entity and no other
shareholder or group of shareholders may exercise substantive participation rights that would enable it to veto or block ordinary decisions taken by Vivendi.
A controlling position also exists when Vivendi, holding an interest of 50% or less in an entity, has (i) control over more than 50% of the voting rights of such entity by
virtue of an agreement entered into with other investors; (ii) the power to govern the financial and operational policies of the entity by virtue of statute or contract, (iii)
the right to appoint or remove from office a majority of the members of the board of directors or other equivalent governing body or (iv) the power to assemble the
majority of voting rights at meetings of the board of directors or other governing body. Revised IAS 27 presents the consolidated financial statements of a group as
those of a single economic entity with two categories of owners: Vivendi SA shareowners and the owners of non-controlling interests. A non-controlling interest is
defined as the equity in a subsidiary that is not attributable, directly or indirectly, to a parent. As a result of this new approach, changes in a parent’s ownership
interest in a subsidiary that do not result in a loss of control only impact equity, as control does not change within the economic entity. Hence, in the event of the
acquisition of an additional interest in a consolidated entity after January 1, 2009, Vivendi recognizes the difference between the acquisition cost and the carrying
value of non-controlling interests acquired as a change in equity attributable to Vivendi SA shareowners. Conversely, any acquisition of control achieved in stages or
a loss of control give rise to profit or loss in the statement of earnings.
Vivendi consolidates special purpose entities that it controls in substance where it either (i) has the right to obtain a majority of benefits; or (ii) retains the majority of
residual risks inherent in the special purpose entity or its assets.
Equity accounting
Entities over which Vivendi exercises significant influence as well as entities over which Vivendi exercises joint control are accounted for under the equity method.
Significant influence is presumed to exist when Vivendi holds, directly or indirectly, at least 20% of voting rights in an entity unless it can be clearly demonstrated that
Vivendi does not exercise significant influence. Significant influence can be demonstrated on the basis of other criteria, such as representation on the board of directors
or the entity’s equivalent governing body, participation in policy-making processes, material transactions with the entity or interchange of managerial personnel.
Companies that are jointly controlled by Vivendi, directly or indirectly, and a limited number of other shareholders under the terms of a contractual arrangement are
also accounted for under the equity method.
1.3.3. Foreign currency translation
The Consolidated Financial Statements are presented in millions of euros. The functional currency of Vivendi SA and the presentation currency of the group is the euro.
Foreign currency transactions
Foreign currency transactions are initially recorded in the functional currency of the entity at the exchange rate prevailing at the date of the transaction. At the closing
date, foreign currency monetary assets and liabilities are translated into the entities functional currency at the exchange rate prevailing on that date. All foreign
currency differences are expensed, with the exception of differences arising from borrowings in foreign currencies which constitute a hedge of the net investment in
a foreign entity. These differences are allocated directly to other comprehensive income until the divestiture of the net investment.
Financial statements denominated in a foreign currency
Except in cases of significant exchange rate fluctuation, financial statements of subsidiaries, joint ventures or other associated entities for which the functional
currency is not the euro, are translated into euros as follows: the Consolidated Statement of Financial Position is translated at the exchange rate at the end of the
period; and the Consolidated Statement of Earnings and the Consolidated Statement of Cash Flow are translated using average monthly exchange rates for the period.
The resulting translation gains and losses are recorded as foreign currency translation differences in other comprehensive income. In accordance with IFRS 1, Vivendi
elected to reverse the accumulated foreign currency translation differences against retained earnings as of January 1, 2004. These foreign currency translation
differences resulted from the translation into euro of the financial statements of subsidiaries having foreign currencies as their functional currencies. Consequently,
these adjustments are not applied to earnings on the subsequent divestiture of the subsidiaries, joint ventures or other associated entities, whose functional currency
is not the euro.
178
1.3.4. Revenues from operations and associated costs
Revenues from operations are recorded when it is probable that future economic benefits will be obtained by the group and when they can be reliably measured.
Revenues are reported net of discounts.
1.3.4.1. Activision Blizzard
Video games
Revenues from the sale of boxes for video-games are recorded, net of a provision for estimated returns and price guarantees (please refer to Note 1.3.4.5 below) and
rebates, if any. Regarding boxes for video-games with significant online functionality, revenues are recorded ratably over the estimated relationship period with the
customer, usually beginning in the month following the shipment of boxes for video-games developed by Activision Blizzard and upon activation of the subscription for
Massively Multiplayer Online Role Playing Games (MMORPG) of Blizzard (World of Warcraft and its expansion packs). The estimated relationship period with the
customer over which revenues are recognized currently ranges from a minimum of five months to a maximum of less than a year.
Deferral of Activision Blizzard revenues
The growing development of online functionality for console games has led Activision Blizzard to believe that online functionality, along with its obligation to ensure
durability, constitutes, for certain games, a service forming an integral part of the game itself. In this case, Activision Blizzard does not account separately for the
revenues linked to the sale of the boxed software and those linked to the online services because it is not possible to determine their respective values, the online
services not being charged for separately. As a result, the company recognizes all of the revenues from the sale of these games ratably over the estimated service
period, usually beginning the month following shipment.
Regarding games that can be played with hardware, Activision Blizzard determines that certain hardware components have stand alone values with established fair
values, as the hardware is either currently being sold separately or will be sold separately in the future. Where this is the case, Activision Blizzard recognizes revenues
for the hardware upon sale and defers the software revenues, if applicable, over the estimated service period based on the relative fair value of the components.
Deferral of Blizzard’s MMORPG revenues
Based upon the view that the service proposed by the expansion pack is closely linked to the initial World of Warcraft boxed software and to the subscription to online
service, thus valuing a global approach of the game, revenues related to the sale of World of Warcraft boxed software, including the sale of expansion packs and other
ancillary revenues, are deferred and recognized ratably over the estimated service relationship period with the customer beginning upon activation of the software by
the customer through subscription.
Other revenues
Revenues generated by subscriptions and prepaid cards for online games are recorded on a straight-line basis over the duration of the service.
Costs of revenues
Costs of revenues include manufacturing, warehousing, shipping and handling costs, royalty, research and development expenses and the amortization of capitalized
software development costs.
1.3.4.2. Universal Music Group (UMG)
Recorded music
Revenues from the physical sale of recorded music, net of a provision for estimated returns (please refer to Note 1.3.4.5) and rebates, are recognized upon shipment to
third parties, at the shipping point for products sold free on board (FOB) and on delivery for products sold free on destination.
Revenues from the digital sale of recorded music, for which UMG has sufficient, accurate and reliable data from certain distributors, are recognized based on their
estimate by the end of the month in which those sales were made to the final customer. In the absence of such data, revenues are recognized upon notification by the
distribution platform (on-line or mobile music distributor) to UMG of a sale to the final customer.
Music publishing
Revenues from the third party use of copyrights on musical compositions owned or administered by UMG are recognized when royalty statements are received and
collectability is assured.
179
Costs of revenues
Costs of revenues include manufacturing and distribution costs, royalty and copyright expenses, artists’ costs, recording costs and direct overheads. Selling, general and
administrative expenses primarily include marketing and advertising expenses, selling costs, provisions for doubtful receivables and indirect overheads.
1.3.4.3. SFR, Maroc Telecom Group and GVT
Separable elements of a bundled offer
Revenues from telephone packages are recognized as multiple-element sales in accordance with IAS 18. Revenues from the sale of telecommunication equipment
(mobile phones and other equipment), net of discounts granted to the customers through the distribution channel, are recognized upon activation of the line. Revenues
from telephone subscriptions are recognized on a straight-line basis over the subscription contract period. Revenues from incoming and outgoing traffic are recognized
when the service is rendered.
Customer acquisition and loyalty costs for mobile phones, principally consisting of rebates on the sale of equipment to customers through distributors, are recognized
as a deduction from revenues. Customer acquisition and loyalty costs consisting of premiums not related to the sale of equipment as part of telephone packages and
commissions paid to distributors are recognized as selling and general expenses.
Equipment rentals
IFRIC 4 – Determining Whether an Arrangement Contains a Lease applies to equipment for which a right of use is granted. Equipment lease revenues are generally
recognized on a straight-line basis over the life of the lease agreement.
Content sales
Sales of services provided to customers managed by SFR and Maroc Telecom Group on behalf of content providers (mainly premium rate numbers) are accounted for
gross, or net of the content providers’ fees when the provider is responsible for the content and for setting the price payable by subscribers.
Custom contracts
Service access and installation costs invoiced primarily to the operator’s clients on the installation of services such as a broadband connection, bandwidth service or
IP connection are recognized over the expected duration of the contractual relationship and the supply of the primary service.
Access to telecommunication infrastructures is provided to clients pursuant to various types of contracts: lease arrangements, hosting contracts or Indefeasible Right
of Use (IRU) agreements. IRU agreements, which are particular to the telecommunication sector, confer an exclusive and irrevocable right to use an asset (cables, fiber
optic or bandwidth) during a (generally lengthy) defined period without a transfer of ownership of the asset. Revenue generated by leases, hosting contracts in the
Netcenters and IRU agreements is recognized over the duration of the corresponding contracts.
In the case of IRU agreements and certain lease or service contracts, services are paid in advance the first year. These non-refundable advance payments are
recognized in deferred income and amortized over the contract term. The amortization period is between 10 and 25 years for IRU agreements and between 1 and 25
years for leases or service contracts.
Costs of revenues
Costs of revenues comprise purchasing costs (including purchases of mobile phones) interconnection and access costs, network and equipment costs. Selling, general
and administrative expenses notably include commercial costs relating to marketing and customer care expenses.
1.3.4.4. Canal+ Group
Pay television
Revenues from television subscription services for terrestrial, satellite or cable pay television platforms are recognized over the service period. Revenues from
advertising are recognized over the period during which advertising commercials are broadcast. Revenues from ancillary services (such as interactive or video-ondemand services) are recognized when the service is rendered. Subscriber management and acquisition costs, as well as television distribution costs, are included in
selling, general and administrative expenses.
Equipment rentals
IFRIC 4 – Determining Whether an Arrangement Contains a Lease, applies to equipment for which a right of use is granted. Equipment lease revenues are generally
recognized on a straight-line basis over the life of the lease agreement.
180
Film and television programming
Theatrical revenues are recognized as the films are screened. Revenues from film distribution and from video and television or pay television licensing agreements are
recognized when the films and television programs are available for telecast and all other conditions of sale have been met. Home video product revenues, less
a provision for estimated returns (please refer to Note 1.3.4.5) and rebates, are recognized upon shipment and availability of the product for retail sale. Amortization of
film and television capitalized and acquisition costs, theatrical print costs, home video inventory costs and television and home video marketing costs are included in
costs of revenues.
1.3.4.5. Other
Provisions for estimated returns and price guarantees are deducted from sales of products to customers through distributors. They are estimated based on
past sales statistics and they take into account the economic environment and product sales forecast to final customers.
The recognition of awards associated with loyalty programs in the form of free or discounted goods or services are recorded according to IFRIC 13. SFR,
Maroc Telecom and Canal+ Group loyalty programs grant to existing customers awards in the form of free services, according to the length of the relationship with the
customer and/or loyalty points for subsequent conversion into either handset renewal subsidies, or free services. IFRIC 13 – Interpretation is based upon the principle
of measuring loyalty awards by reference to their fair value. Fair value is defined as the excess price over the sales incentive that would be granted to any new
customer, and, should any such excess price exist, would result in deferring the recognition of the revenue associated with the subscription in the amount of such
excess price.
Selling, general and administrative expenses primarily include salaries and employee benefits, rents, consulting and service fees, insurance costs, travel and
entertainment expenses, administrative department costs, provisions for receivables and other operating expenses.
Advertising costs are expensed as incurred.
Slotting fees and cooperative advertising expenses are recorded as a reduction in revenues. However, cooperative advertising at UMG and Activision Blizzard
is treated as a marketing expense and expensed when its expected benefit is individualized and can be estimated.
1.3.5. Assets
1.3.5.1. Capitalized financial interest
Until December 31, 2008, Vivendi did not capitalize financial interest incurred during the construction and acquisition period of intangible assets and, property, plant
and equipment. Since January 1, 2009, according to amended IAS 23 – Borrowing costs, this interest is included in the cost of qualifying assets. Vivendi may apply
this amendment to qualifying assets for which the commencement date for capitalization of costs is January 1, 2009 onwards.
1.3.5.2. Goodwill and business combinations
Business combinations from January 1, 2009
Business combinations are recorded using the acquisition method. Under this method, upon the initial consolidation of an entity over which the group has acquired
exclusive control:
• the identifiable assets acquired and the liabilities assumed are recognized at their fair value on the acquisition date; and
• non-controlling interests are measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.
This option is available on a transaction-by-transaction basis.
On the acquisition date, goodwill is initially measured as the difference between:
(i) the fair value of the consideration transferred, plus the amount of non-controlling interests in the acquiree and, in a business combination achieved in
stages, the acquisition-date fair value of the previously held equity interest in the acquiree; and
(ii) the net fair value of the identifiable assets and liabilities assumed on the acquisition date.
The measurement of non-controlling interests at fair value results in increasing goodwill up to the extent attributable to these interests, thus leading to the recognition
of a “full goodwill”. The purchase price allocation shall be performed within 12 months after the acquisition date. If goodwill is negative, it is recognized in the
Statement of Earnings. Subsequent to the acquisition date, goodwill is measured at its initial amount less recorded accumulated impairment losses (please refer to
Note 1.3.5.7 below).
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In addition, the following principles are applied to business combinations:
• on the acquisition date, to the extent possible, goodwill is allocated to each cash-generating unit likely to benefit from the business combination;
• contingent consideration in a business combination is recorded at fair value on the acquisition date and any subsequent adjustment, occurring after the
purchase price allocation period is recognized in the Statements of Earnings;
• acquisition-related costs are recognized as expenses when incurred;
• in the event of the acquisition of an additional interest in a subsidiary, Vivendi recognizes the difference between the acquisition cost and the carrying
value of non-controlling interests acquired as a change in equity attributable to Vivendi SA shareowners; and
• goodwill is not amortized.
Business combinations prior to January 1, 2009
Pursuant to IFRS 1, Vivendi elected not to restate business combinations that occurred prior to January 1, 2004. IFRS 3, as published by the IASB in March 2004,
already retained the acquisition method. However, its provisions differed from those of the revised standard on the main following items:
• minority interests were measured at their proportionate share of the acquiree’s net identifiable assets as there was no option of measurement at fair
value;
• contingent consideration was recognized in the cost of acquisition only if the payment was likely to occur and the amounts could be reliably measured;
• transaction costs that were directly attributable to the acquisition formed part of acquisition costs; and
• in the event of the acquisition of an additional interest in a subsidiary, the difference between the acquisition cost and the carrying value of minority
interests acquired was recognized as goodwill.
1.3.5.3. Content assets
Activision Blizzard
Licensing activities and internally developed franchises are recognized as content assets at their acquisition cost or development cost (please refer to Note 1.3.5.4
below) and are amortized over their estimated useful life on the basis of the rate at which the related economic benefits are consumed. Where appropriate,
impairment loss is fully recognized against earnings of the period during which the loss is identified. This generally leads to an amortization period of 3 to 10 years
for licenses, and 11 to 12 years for franchises.
UMG
Music publishing rights and catalogs include music catalogs, artists’ contracts and publishing rights acquired in December 2000, as part of the acquisition of
The Seagram Company Ltd. or more recently. They are amortized over 15 years in selling, general and administrative expenses.
Royalty advances to artists, songwriters and co-publishers are capitalized as an asset when their current popularity and past performances provide a reasonable basis
to conclude that the probable future recoupment of such royalty advances against earnings otherwise payable to them is reasonably assured. Royalty advances are
recognized as an expense as subsequent royalties are earned by the artist, songwriter or co-publisher. Any portion of capitalized royalty advances not deemed to
be recoverable against future royalties is expensed during the period in which the loss becomes evident. These expenses are recorded in cost of revenues.
Royalties earned by artists, songwriters and co-publishers are recognized as an expense in the period during which the sale of the product occurs, less a provision
for estimated returns.
Canal+ Group
Film, television or sports broadcasting rights
When entering into contracts for the acquisition of film, television or sports broadcasting rights, the rights acquired are classified as contractual commitments. They are
recorded in the Statement of Financial Position and classified as content assets as follows:
• film and television broadcasting rights are recognized at their acquisition cost, when the program is available for screening and are expensed over their
broadcasting period;
• sports broadcasting rights are recognized at their acquisition cost, at the opening of the broadcasting period of the related sports season or upon the first
payment and are expensed as they are broadcast; and
• expensing of film, television or sports broadcasting rights is included in cost of revenues.
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Theatrical film and television rights produced or acquired to be sold
Theatrical film and television rights produced or acquired before their initial exhibition, to be sold, are recorded as a content asset at capitalized cost (mainly direct
production and overhead costs) or at their acquisition cost. Theatrical film and television rights are amortized, and other related costs are expensed, pursuant to the
estimated revenue method (i.e., based on the ratio of the current period’s gross revenues to estimated total gross revenues from all sources on an individual
production basis). Vivendi considers that amortization pursuant to the estimated revenue method reflects the rate at which the entity plans to consume the future
economic benefits related to the asset. Accumulated amortization under this rate is, for this activity, generally not lower than the charge that would be obtained under
the straight-line amortization method. If, however, the accumulated amortization would be lower than this charge, a minimum straight-line amortization would be
calculated over a maximum 12-year period, which corresponds to the typical screening period of each film.
Where appropriate, estimated losses in value are provided in full against earnings of the period, in which the losses are estimated, on an individual product basis.
Film and television rights catalogs
Catalogs are comprised of film rights acquired for a second television exhibition, or produced or acquired film and television rights that are sold after their first
television screening (i.e., after their first broadcast on a free terrestrial channel). They are recognized as an asset at their acquisition or transfer cost, and amortized as
groups of films, or individually, based respectively on the estimated revenue method.
1.3.5.4. Research and development costs
Research costs are expensed when incurred. Development expenses are capitalized when the feasibility and, in particular, profitability of the project can reasonably
be considered certain.
Cost of software for rental, sale or commercialization
Capitalized software development costs comprise amounts paid to entitled beneficiaries for the use of their intellectual property content for developing new games
(e.g., software development, graphics and editorial content), direct costs incurred during the internal development of products and the acquisition costs of developed
software. Software development costs are capitalized when, notably, the technical feasibility of the software is established and they are deemed recoverable. These
costs are mainly generated by Activision Blizzard as part of the games development process and are amortized using the estimated revenue method (i.e., based on the
ratio of the current period’s gross revenues to estimated total gross revenues) for a given product, which generally leads to the amortization of costs over a maximum
period of 6 months commencing on a product’s release. Technical feasibility is determined on a product-by-product basis. Non-capitalized software development costs
are immediately recorded as research and development costs. The future recoverability of capitalized software development costs and intellectual property license
costs is assessed every quarter. When their recoverable value is less than their carrying value, an impairment loss is recognized against earnings of the period.
Cost of internal use software
Direct internal and external costs incurred for the development of computer software for internal use, including website development costs, are capitalized during the
application development stage. Application development stage costs generally include software configuration, coding, installation and testing. Costs of significant
upgrades and enhancements resulting in additional functionality are also capitalized. These capitalized costs, mainly recognized at SFR, are amortized over 4 years.
Maintenance and minor upgrade and enhancement costs are expensed as incurred.
1.3.5.5. Other intangible assets
Intangible assets acquired separately are recorded at cost, and intangible assets acquired in connection with a business combination are recorded at their fair value at
the acquisition date. The historical cost model is applied to intangible assets after they have been recognized. Assets with an indefinite useful life are not amortized
but are all subject to an annual impairment test. Amortization is accrued for assets with a finite useful life. Useful life is reviewed at the end of each reporting period.
Other intangible assets include trade names, customer bases and licenses. Music catalogs, trade names, subscribers’ bases and market shares generated internally
are not recognized as intangible assets.
SFR, Maroc Telecom Group and GVT
Licenses to operate telecom networks are recorded at historical cost based upon the discounted value of deferred payments and amortized on a straight-line basis
from their effective service start date over their estimated useful life until maturity. Licenses to operate in France are recognized in the amount of the fixed, upfront
fee paid upon the granting of the license. The variable fee, which cannot be reliably determined (equal to 1% of the revenues generated by the activity in the case of
the UMTS and GSM licenses in France) is recorded as an expense when incurred.
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1.3.5.6. Property, plant and equipment
Property, plant and equipment are carried at historical cost less any accumulated depreciation and impairment losses. Historical cost includes the acquisition cost or
production cost, the costs directly attributable to transporting an asset to its physical location and preparing it for use in operations, the estimated costs for the
demolition and the collection of property, plant and equipment, and the rehabilitation of the physical location, resulting from the incurred obligation.
When property, plant and equipment include significant components with different useful lives, they are recorded and amortized separately. Amortization is computed
using the straight-line method based on the estimated useful life of the assets. Useful life is reviewed at the end of each reporting period.
Property, plant and equipment mainly consist of the network equipment of telecommunications activities, each part of which is amortized generally over 1 to 25 years.
The useful lives of the main parts are as follow:
• buildings: over 8 to 25 years;
• pylons: over 15 to 20 years;
• radio and transmission equipment: over 3 to 10 years;
• switch centers: 8 years; and
• servers and hardware: over 1 to 8 years.
Assets financed by finance lease contracts are capitalized at the lower of the fair value of future minimum lease payments and of the market value and the related
debt is recorded as “Borrowings and other financial liabilities”. In general, these assets are amortized on a straight-line basis over their estimated useful life,
corresponding to the duration applicable to property, plant and equipment from the same category. Amortization expenses on assets acquired under such leases are
included in amortization expenses.
After initial recognition, the cost model is applied to property, plant and equipment.
Vivendi has elected not to apply the option available under IFRS 1, involving the remeasurement of certain property, plant and equipment at their fair value as of
January 1, 2004.
On January 1, 2004, in accordance with IFRS 1, Vivendi decided to apply IFRIC Interpretation 4 – Determining whether an arrangement contains a lease that currently
mainly applies to commercial supply agreements for the Canal+ Group satellite capacity and for SFR, Maroc Telecom Group and GVT telecommunications services:
• Indefeasible Right of Use (IRU) agreements confer an exclusive and irrevocable right to use an asset during a defined period. IRU agreements are leases
which convey a specific right of use for a defined portion of the underlying asset in the form of dedicated fibers or wavelengths. IRU agreements are
capitalized if the agreement period covers the major part of the useful life of the underlying asset. IRU contract costs are capitalized and amortized over
the contract term.
• Some IRU contracts are commercial service agreements since they do not convey a right to use a specific asset; IRU contract costs are consequently
expensed as operational costs for the period.
1.3.5.7. Asset impairment
Each time events or changes in the economic environment indicate a current risk of impairment of goodwill, other intangible assets, property, plant and equipment,
and assets in progress, Vivendi re-examines the value of these assets. In addition, goodwill, other intangible assets with an indefinite useful life, and intangible assets
in progress are all subject to an annual impairment test during the fourth quarter of each fiscal year. This test is performed in order to compare the recoverable amount
of each Cash Generating Unit (CGU) or, if necessary, groups of CGU to the carrying value of the corresponding assets (including goodwill). A Cash Generating Unit is
the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The Vivendi group operates through different communication businesses. Each business offers different products and services that are marketed through different
channels. CGUs are independently defined at each business level, corresponding to the group operating segments. Vivendi CGUs and groups of CGUs are presented
in Note 9.
The recoverable amount is determined as the higher of either: (i) the value in use; or (ii) the fair value (less costs to sell) as described hereafter, for each individual
asset. If the asset does not generate cash inflows that are largely independent of other assets or groups of assets, the recoverable amount is determined for the group
of assets. In particular, an impairment test of goodwill is performed by Vivendi for each CGU or group of CGUs, depending on the level at which Vivendi management
measures return on operations.
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The value in use of each asset or group of assets is determined as the discounted value of future cash flows (discounted cash flow method (DCF)) by using cash flow
projections consistent with the 2011 budget and the most recent forecasts prepared by the operating segments. The applied discount rates reflect the current
assessment by the market of the time value of money and risks specific to each asset or group of assets. In particular, the perpetual growth rates used for the
evaluation of CGUs are those used to prepare budgets for each CGU or group of CGUs, and beyond the period covered, are consistent with growth rates estimated
by the company by extrapolating growth rates used in the budgets, without exceeding the long-term average growth rate for the markets in which the group operates.
The fair value (less costs to sell) is the amount obtainable from the sale of the asset or group of assets in an arm’s length transaction between knowledgeable and
willing parties, less costs to sell. These values are determined on the basis of market data (stock market prices or comparison with similar listed companies, with the
value attributed to similar assets or companies in recent transactions) or on discontinued future cash flows in the absence of reliable data.
If the recoverable amount is lower than the carrying value of an asset or group of assets, an impairment loss is recognized in EBIT for the difference in the amounts.
In the case of a group of assets, this impairment loss is recorded first against goodwill.
The impairment losses recognized in respect of property, plant and equipment, and intangible assets (other than goodwill) may be reversed in a later period if the
recoverable amount becomes greater than the carrying value, within the limit of impairment losses previously recognized. Impairment losses recognized in respect of
goodwill cannot be reversed at a later date.
1.3.5.8. Financial assets
Financial assets consist of financial assets measured at fair value and financial assets recognized at amortized cost. Financial assets are initially recognized at the fair
value corresponding, in general, to the consideration paid, for which the best evidence is the acquisition cost (including associated acquisition costs, if any).
Financial assets at fair value
Financial assets at fair value include available-for-sale securities, derivative financial instruments with a positive value (please refer to Note 1.3.7) and other financial
assets measured at fair value through profit or loss. Most of these financial assets are actively traded in organized public markets, their fair value being determined by
reference to the published market price at period end. For financial assets for which there exists no published market price in an active market, fair value is then
estimated. As a last resort, the group values financial assets at historical cost, less any impairment losses, when a reliable estimate of fair value cannot be made using
valuation techniques in the absence of an active market.
Available-for-sale securities consist of unconsolidated interests and other securities not qualifying for classification in the other financial asset categories described
below. Unrealized gains and losses on available-for-sale securities are recognized in other comprehensive income until the financial asset is sold, collected or removed
from the Statement of Financial Position in another way, or until there is objective evidence that the investment is impaired, at which time the accumulated gain or
loss previously reported in other comprehensive income is expensed in other financial charges and income.
Other financial assets measured at fair value through profit or loss mainly consist of assets held for trading which Vivendi intends to sell in the near future (primarily
marketable securities). Unrealized gains and losses on these assets are recognized in other financial charges and income.
Financial assets at amortized cost
Financial assets at amortized cost consist of loans and receivables (primarily loans to affiliates and associates, current account advances to equity affiliates and
unconsolidated interests, cash deposits, securitized loans and receivables, and other loans and receivables, and debtors) and held-to-maturity investments (financial
assets with fixed or determinable payments and fixed maturity). At the end of each period, these assets are measured at amortized cost using the effective interest
method. If there is objective evidence that an impairment loss has been incurred, the amount of this loss, measured as the difference between the financial asset’s
carrying value and its recoverable amount (equal to the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate),
is recognized in profit or loss. Impairment losses may be reversed if the recoverable amount of the asset subsequently increases in the future.
1.3.5.9. Inventories
Inventories are valued at the lower of cost or net realizable value. Cost comprises purchase costs, production costs and other supply and packaging costs. They are
usually computed at the weighted average cost method. Net realizable value is the estimated selling price in the normal course of business, less estimated completion
costs and selling costs.
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1.3.5.10. Trade accounts receivable
Trade accounts receivable are initially recognized at fair value, which generally equals the nominal value. Provisions for impairment of receivables are specifically
evaluated in each business unit, generally using a default percentage based on the unpaid amounts during one reference period related to revenues for this same
period. Accounts receivables from former customers, customers subject to insolvency proceedings or from customers with whom Vivendi is involved in litigation or
a dispute are generally impaired in full.
1.3.5.11. Cash and cash equivalents
The “cash and cash equivalents” category consists of cash in banks, euro-denominated and international monetary UCITS, which satisfy Recommendation No. 200502 of the AMF, and other highly liquid investments with initial maturities of three months or less. Investments in securities, investments with initial maturities of more
than three months without the possibility of early termination and bank accounts subject to restrictions (blocked accounts), other than restrictions due to regulations
specific to a country or activity sector (e.g., exchange controls) are not classified as cash equivalents but as financial assets.
1.3.6. Assets held for sale and discontinued operations
A non-current asset or a group of assets and liabilities is held for sale when its carrying value may be recovered principally through its divestiture and not by its
continued utilization. To meet this definition, the asset must be available for immediate sale and the divestiture must be highly probable. These assets and liabilities
are recognized as assets held for sale and liabilities associated with assets held for sale, without offset. The related assets recorded as assets held for sale are valued
at the lower of the difference between the fair value (net of divestiture fees) and the carrying value, or cost less accumulated depreciation and impairment losses, and
are no longer depreciated.
An operation is qualified as discontinued when it represents a separate major line of business and the criteria for classification as an asset held for sale have been met
or when Vivendi has sold the asset. Discontinued operations are reported on a single line of the Statement of Earnings for the periods reported, comprising the
earnings after tax of discontinued operations until divestiture and the gain or loss after tax on sale or fair value measurement, less costs to sell the assets and
liabilities of the discontinued operations. In addition, cash flows generated by discontinued operations are reported on a separate line of the Statement of
Consolidated Cash Flows for the relevant periods.
1.3.7. Financial liabilities
Long and short-term borrowings and other financial liabilities include:
• bonds and facilities, as well as miscellaneous other borrowings (including commercial paper and debt related to finance leases) and related
accrued interest;
• obligations arising in respect of commitments to purchase minority interests;
• bank overdrafts; and
• the negative value of other derivative financial instruments. Derivatives with positive fair values are recorded as financial assets in the Statement
of Financial Position.
Borrowings
All borrowings are initially accounted for at fair value net of transaction costs directly attributable to the borrowing. Borrowings bearing interest are subsequently
valued at amortized cost, applying the effective interest method. The effective interest rate is the internal yield rate that exactly discounts future cash flows over the
term of the borrowing. In addition, where the borrowing comprises an embedded derivative (e.g., an exchangeable bond) or an equity instrument (e.g., a convertible
bond), the amortized cost is calculated for the debt component only, after separation of the embedded derivative or equity instrument. In the event of a change in
expected future cash flows (e.g., redemption earlier than initially expected), the amortized cost is adjusted against earnings in order to reflect the value of the new
expected cash flows, discounted at the initial effective interest rate.
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Commitments to purchase non-controlling interests
Vivendi has granted commitments to purchase non-controlling interests to certain shareholders of its fully consolidated subsidiaries. These purchase commitments
may be optional (e.g., put options) or firm (e.g., forward purchase contracts).
The following accounting treatment has been adopted for commitments granted prior to January 1, 2009:
• upon initial recognition, the commitment to purchase minority interests is recognized as a financial liability for the present value of the purchase
consideration under the put option or forward purchase contract, mainly offset through minority interests and the balance through goodwill;
• subsequent changes in the value of the commitment are recognized as a financial liability by an adjustment to goodwill;
• where applicable, at the time of initial recognition or the recognition of subsequent changes, any expected loss on purchase is recognized in other financial
charges and income; and
• on maturity of the commitment, if the minority interests are not purchased, the entries previously recognized are reversed; if the minority interests are
purchased, the amount recognized in financial liabilities is reversed, offset by the cash outflow relating to the purchase of the minority interests.
According to the provisions of revised IAS 27, commitments granted on or after January 1, 2009 are initially recognized as a financial liability for the present value of
the purchase consideration under the put option or forward purchase contract, mainly offset through non-controlling interests and the balance through equity
attributable to Vivendi SA shareowners. Subsequent changes in the value of the commitment are recognized as a financial liability by an adjustment to equity
attributable to Vivendi SA shareowners.
Derivative financial instruments
Vivendi uses derivative financial instruments to manage and reduce its exposure to fluctuations in interest rates, foreign currency exchange rates and stock prices.
All instruments are either listed on organized markets or traded over-the-counter with highly-rated counterparties. These instruments include interest rate and
currency swaps and forward exchange contracts. They also include stock options used to hedge debt where principal repayment terms are based on the value
of Vivendi or other stock, as well as Vivendi stock purchase option plans granted to executives and employees. All derivative financial instruments are used for
hedging purposes.
When these contracts qualify as hedges for accounting purposes, gains and losses arising on these contracts are offset in earnings against the gains and losses
relating to the hedged item. When the derivative financial instrument hedges exposures to fluctuations in the fair value of an asset or a liability recognized in the
Statement of Financial Position or of a firm commitment which is not recognized in the Statement of Financial Position, it is a fair value hedge. The instrument is
remeasured at fair value in earnings, with the gains or losses arising on remeasurement of the hedged portion of the hedged item offset on the same line of the
Statement of Earnings, or, as part of a forecasted transaction relating to a non-financial asset or liability, at the initial cost of the asset or liability. When the derivative
financial instrument hedges cash flows, it is a cash flow hedge. The hedging instrument is remeasured at fair value and the portion of the gain or loss that is determined
to be an effective hedge is recognized through other comprehensive income, whereas its ineffective portion is recognized in earnings, or, as part of a forecasted
transaction on a non-financial asset or liability, they are recognized at the initial cost of the asset or liability. When the hedged item is realized, accumulated gains and
losses recognized in equity are released to the Statement of Earnings and recorded on the same line as the hedged item. When the derivative financial instrument
hedges a net investment in a foreign operation, it is recognized in the same way as a cash flow hedge. Derivative financial instruments which do not qualify as a hedge
for accounting purposes are remeasured at fair value and resulting gains and losses are recognized directly in earnings, without remeasurement of the underlying
instrument.
Furthermore, income and expenses relating to foreign currency instruments used to hedge highly probable budget exposures and firm commitments, contracted
pursuant to the acquisition of editorial content rights (including sports, audiovisual and film rights) are recognized in EBIT. In all other cases, gains and losses arising
on the fair value remeasurement of instruments are recognized in other financial charges and income.
1.3.8. Other liabilities
Provisions
Provisions are recognized when, at the end of the reporting period, Vivendi has a legal obligation (legal, regulatory or contractual) or a constructive obligation, as
a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the obligation can be
reliably estimated. Where the effect of the time value of money is material, provisions are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money. If no reliable estimate can be made of the amount of the obligation, no provision is recorded and a disclosure
is made in the Notes to the Consolidated Financial Statements.
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Employee benefit plans
In accordance with the laws and practices of each country in which it operates, Vivendi participates in, or maintains, employee benefit plans providing retirement
pensions, post-retirement health care, life insurance and post-employment benefits to eligible employees, former employees, retirees and such of their beneficiaries who
fulfill the required conditions. Retirement pensions are provided for substantially all employees through defined contribution plans, which are integrated with local social
security and multi-employer plans, or defined benefit plans which are generally managed via group pension plans. The plan funding policy implemented by the group is
consistent with applicable government funding requirements and regulations.
Defined contribution plans
Contributions to defined contribution and multi-employer plans are expensed during the year.
Defined benefit plans
Defined benefit plans may be funded by investments in various instruments such as insurance contracts or equity and debt investment securities, excluding Vivendi
shares or debt instruments.
Pension expenses are determined by independent actuaries using the projected unit credit method. This method is based on annually updated assumptions, which
include the probability of employees remaining with Vivendi until retirement, expected changes in future compensation and an appropriate discount rate for each
country in which Vivendi maintains a pension plan. The assumptions adopted in 2009 and 2010, and the means of determining these assumptions, are presented in
Note 20. As such, the group recognizes pension-related assets and liabilities and the related net expense.
A provision is recorded in the Statement of Financial Position equal to the difference between the actuarial value of the related benefits (actuarial liability) and the fair
value of any associated plan assets, net of past service cost and unrecognized actuarial gains and losses which remain unrecognized in the Statement of Financial
Position in accordance with the “corridor method”. Where the value of the hedged assets exceeds recognized obligations, a financial asset is recognized up to the
maximum cumulative amount of net actuarial losses, unrecognized past service cost and the present value of future redemptions and the expected decrease in
future contributions.
Actuarial gains and losses are recognized through profit and loss for the year using the “corridor method”: actuarial gains and losses in excess of 10% of the greater of
the obligation and the fair value of plan assets at the beginning of the fiscal year, are divided by the expected average working life of beneficiaries. On January 1, 2004,
in accordance with IFRS 1, Vivendi decided to record unrecognized actuarial gains and losses against consolidated equity.
The cost of plans is included in selling, general and administrative expenses, except for the financial component which is recorded in other financial charges and income.
The financial component of this cost consists of the undiscounting of the actuarial liability and the expected return on plan assets.
Some other post-employment benefits, such as life insurance and medical coverage (mainly in the United States) are subject to provisions which are assessed through
an actuarial computation comparable to the method used for pension provisions.
1.3.9. Deferred taxes
Differences existing at closing between the tax base value of assets and liabilities and their carrying value in the Consolidated Statement of Financial Position give
rise to temporary differences. Pursuant to the liability method, these temporary differences result in the accounting of:
• deferred tax assets, when the tax base value is greater than the carrying value (expected future tax saving); and
• deferred tax liabilities, when the tax base value is lower than the carrying value (expected future tax expense).
Deferred tax assets and liabilities are measured at the expected tax rates for the year during which the asset will be realized or the liability settled, based on tax rates
(and tax regulations) enacted or substantially enacted by the closing date. They are reviewed at the end of each year, in line with any changes in applicable tax rates.
Deferred tax assets are recognized for all deductible temporary differences, tax loss carry-forwards and unused tax credits, insofar as it is probable that a taxable
profit will be available, or when a current tax liability exists, to make use of those deductible temporary differences, tax loss carry-forwards and unused tax credits,
except where the deferred tax asset associated with the deductible temporary difference is generated by initial recognition of an asset or liability in a transaction
which is not a business combination, and that, at the transaction date, does not impact earnings, nor tax income or loss.
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For deductible temporary differences arising from investments in subsidiaries, joint ventures and other associated entities, deferred tax assets are recorded to the
extent that it is probable that the temporary difference will reverse in the foreseeable future and that taxable profit will be available against which the temporary
difference can be utilized.
The carrying value of deferred tax assets is reviewed at each closing date, and revalued or reduced to the extent that it is more or less probable that a taxable profit
will be available to allow the deferred tax asset to be utilized. When assessing the probability of a taxable profit being available, account is taken, primarily of prior
years’ results, forecasted future results, non-recurring items unlikely to occur in the future and the tax strategy. As such, the assessment of the group’s ability to utilize
tax losses carried forward is to a large extent judgment-based. If the future taxable results of the group proved to differ significantly from those expected, the group
would be required to increase or decrease the carrying value of deferred tax assets with a potentially material impact on the Statement of Financial Position and
Statement of Earnings of the group.
Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability results from goodwill, or initial recognition of an
asset or liability in a transaction which is not a business combination, and that, at the transaction date, does not impact earnings, nor tax income or loss.
For taxable temporary differences arising from investments in subsidiaries, joint ventures and other associated entities, deferred tax liabilities are recorded except to
the extent that both of the following conditions are satisfied: the parent, investor or venturer is able to control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not be reversed in the foreseeable future.
Current tax and deferred tax shall be charged or credited directly to equity, and not earnings, if the tax relates to items that are credited or charged directly to equity.
1.3.10. Share-based compensation
With the aim of aligning the interest of its executive management and employees with its shareholders’ interest by providing them with an additional incentive to
improve the company’s performance and increase its share price on a long-term basis, Vivendi maintains several share-based compensation plans (share purchase
plans and grant of performance shares) or other equity instruments based on the value of the Vivendi share price (stock option plans), which are settled either in equity
instruments or in cash. Grants under these plans are approved by the Management Board, and subsequently by the Supervisory Board. The acquisition of rights
related to these plans is contingent upon the achievement of specific performance objectives.
In addition, Activision Blizzard maintains several share-based compensation plans (share purchase plans and restricted shares) or other equity instruments based on
the value of the Activision Blizzard share price (stock purchase plans or stock option plans), which are settled either in equity instruments or in cash. Grants under
these plans are approved by the Board of Directors of Activision Blizzard. The acquisition of rights related to certain plans is contingent upon the achievement of
specific performance objectives.
Lastly, Universal Music Group maintains Equity Long-Term Incentive Plans. Under these plans, certain key executives are awarded equity units. These equity units are
phantom stock units whose value is intended to reflect the value of UMG and are settled in cash.
Please refer to Note 21 for a detail of these plans’ characteristics.
Share-based compensation is recognized as a personnel cost at the fair value of the equity instruments granted. This expense is amortized over the vesting period
with respect to Vivendi’s plans, conditional upon the achievement of specific performance objectives and active employment within the group at the vesting date,
generally 3 years for stock option plans and 2 years for performance shares, other than in specific cases.
Vivendi and Activision Blizzard use a binomial model to assess the value of such instruments. This method relies on assumptions updated at the valuation date such as
the computed volatility of the relevant shares, the risk-free discount rate, the expected dividend yield and the probability of relevant managers and employees
remaining employed within the group until the exercise of their rights.
However, depending on whether the equity instruments granted are equity-settled through the issuance of shares or cash-settled, the valuation and recognition of the
expense differs:
Instruments settled through the issuance of shares:
• the expected term of the option granted is deemed to be the mid-point between the vesting date and the end of the contractual term;
• the value of the instruments granted is estimated and fixed at grant date; and
• the expense is recognized with a corresponding increase in equity.
189
Instruments settled in cash:
• the expected term of the instruments granted is deemed to be equal to one-half of the residual contractual term of the instrument for vested rights, and to
the average of the residual vesting period at the remeasurement date and the residual contractual term of the instrument for unvested rights;
• the value of instruments granted is initially estimated at grant date and is then re-estimated at each reporting date and the expense is adjusted pro rata
taking into account the vested rights at each such reporting date;
• the expense is recognized as a provision; and
• moreover, as plans settled in cash are primarily denominated in US dollars, the value changes in line with fluctuations in the euro/dollar exchange rate.
A share-based compensation cost is allocated to each operating segment, pro rata the number of equity instruments or equivalent instruments granted to their
managers and employees.
The dilutive effect of stock options and performance shares settled in equity through the issuance of Vivendi or Activision Blizzard shares which are in the process of
vesting is reflected in the calculation of diluted earnings per share.
In accordance with IFRS 1, Vivendi elected to retrospectively apply IFRS 2 as of January 1, 2004. Consequently, all share-based compensation plans for which rights
remained to be vested as of January 1, 2004 were accounted for in accordance with IFRS 2.
1.4. Contractual obligations and contingent assets and liabilities
Once a year, Vivendi and its subsidiaries prepare detailed reports on all material contractual obligations, commercial and financial commitments and contingent
obligations, for which they are jointly and severally liable. These detailed reports are updated by the relevant departments and reviewed by senior management on
a regular basis. In order to ensure completeness, accuracy and consistency of these reports, some dedicated internal control procedures are performed, including (but
not limited to) the review of:
• minutes from meetings of the shareholders, Management Board, Supervisory Board and committees of the Supervisory Board in respect of matters such as
contracts, litigation, and authorization of asset acquisitions or divestitures;
• pledges and guarantees with banks and financial institutions;
• pending litigation, claims (in dispute) and environmental matters as well as related assessments for unrecorded contingencies with internal and/or external
legal counsels;
• tax examiner’s reports and, if applicable, notices of assessments and tax expense analyses for prior years;
• insurance coverage for unrecorded contingencies with the risk management department and insurance agents and brokers with whom the group contracted;
• related-party transactions for guarantees and other given or received commitments; and more generally
• major contracts and agreements.
1.5. New IFRS standards and IFRIC interpretations that have been published but are not yet effective
Among the IFRS accounting standards and IFRIC interpretations issued by the IASB/IFRIC at the date of approval of these Consolidated Financial Statements but that
are not yet effective, for which Vivendi has not elected an earlier application, and which may have an impact on Vivendi are mainly amendments to different IFRS
included in the annual “Improvements to IFRSs” as published by the IASB on May 6, 2010, which are effective from different dates depending on the relevant
provision, but the earliest applicable date being on or after January 1, 2011.
Vivendi is currently assessing the potential impact of the application of these amendments on the Statement of Earnings, the Statement of Financial Position, the
Statement of Cash Flows and the content of the notes to the Financial Statements.
190
Note 2. Changes in the scope of consolidation in 2010 and 2009
Preliminary notes:
As a reminder, Vivendi opted for early application, from January 1, 2009, of revised standards IFRS 3 – Business Combinations – and IAS 27 – Consolidated and Separate
2.1. Acquisition of 100% of GVT (Holding) S.A. in Brazil
On November 13, 2009, Vivendi took over GVT (Holding) S.A. (GVT), the leading alternative telecommunications operator in Brazil, which was fully consolidated by
Vivendi at that date. Pursuant to the acquisition of GVT, Vivendi held 37.9% of GVT’s outstanding voting shares and had a right to purchase an additional 19.6% of
GVT’s outstanding voting shares pursuant to call option agreements.
As of December 31, 2009, Vivendi held an 82.45% controlling interest in GVT. Vivendi’s investment in GVT was completed according to the following schedule:
• On November 13, 2009, Vivendi acquired an aggregate of 29.9% of GVT’s outstanding voting shares, at BRL56 per share, from Swarth Investments LLC,
Swarth Investments Holdings LLC and Global Village Telecom (Holland) BV, the founding and controlling shareholders of GVT. In addition, Vivendi acquired
from third parties an additional 8% interest in GVT’s outstanding voting shares at various prices per share comprised between BRL49 and BRL56 and held
unconditional call options giving Vivendi the right to acquire an additional 19.6% interest in GVT’s outstanding voting shares, at an exercise price of BRL55
per share, plus a premium of BRL1 per share. Consequently, at that date, Vivendi held 37.9% of GVT’s outstanding voting shares and had a right to purchase
an additional 19.6% interest in GVT’s outstanding voting shares which gave Vivendi control over 57.5% of GVT’s outstanding voting shares (53.7% on
a fully diluted basis). As a result, as of November 13, 2009, Vivendi acquired exclusive control of GVT, defined as the power to govern GVT’s financial and
operational policies so as to obtain benefits from its operations. In accordance with Brazilian rules and regulations, Vivendi filed a mandatory cash tender
offer (the“Tender Offer”) to purchase the remaining shares of GVT with the Brazilian securities regulator, at a price per share of BRL56, with an offer price
adjustment based on fluctuations of the SELIC Rate (Taxa Referencial do Sistema Especial de Liquidação e Custódia) from November 13, 2009 until the
settlement date of the Tender Offer.
• As of December 31, 2009, following additional acquisitions of GVT shares on the market by Vivendi and the full exercise of the call options mentioned
above, which represented an approximate 25% of GVT’s outstanding voting shares, Vivendi held an 82.45% controlling interest in GVT, for a total
investment of €2,507 million (including Financial Net Debt assumed for €47 million as of November 13, 2009).
• Considering that pursuant to the obligation to launch its Tender Offer, Vivendi committed to purchase all tendered shares, i.e., a maximum of 17.55% of
GVT’s outstanding voting shares as of December 31, 2009, Vivendi recorded an amount estimated at €571 million share purchase commitment in financial
debt as of such date.
In 2010, Vivendi increased its interest in GVT to 100% after having acquired the 17.55% interest that it did not hold, as follows:
• During the first quarter 2010, Vivendi acquired 6.3 million GVT shares on the market for a total price of €144 million.
• On March 26, 2010, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliàros, “CVM”) authorized the Tender Offer for the
acquisition of 17.8 million GVT shares, not held yet by Vivendi on that date at BRL56 per share (the “Offer Price”), with price adjustments in accordance
with the variation of the SELIC Rate over the period between November 13, 2009 and April 30, 2010, the Tender Offer settlement date. On April 27, 2010,
at the close of the regulatory auction, Vivendi acquired an additional 16.6 million GVT common shares for a purchase price of €416 million and held
a 99.17% controlling interest in GVT. As a result, on May 7, 2010, in accordance with Brazilian securities regulations and following the CVM’s authorization,
GVT was deregistered as a public company.
• Finally, as part of the squeeze-out approved by the shareholders’ meeting on June 10, 2010, GVT cancelled on June 11, 2010 its outstanding common
shares and made a €30 million deposit with a Brazilian bank in order to guarantee and repay those shareholders whose shares were cancelled.
After taking into account all of these components and the effects of EUR-BRL foreign currency hedging, aimed at partially offsetting the acquisition of shares in BRL,
the purchase price of 100% of GVT by Vivendi amounts to €3,038 million, determined according to the fair value of the consideration transferred. As a reminder,
transactions that occurred in 2010 did not have any significant impact on Vivendi’s Financial Net Debt. In accordance with applicable accounting standards, the
commitment to purchase GVT shares not held by Vivendi as of December 31, 2009 was recorded as a financial liability and included in Vivendi’s Financial Net Debt on
that date.
191
Determination of goodwill at 100%
In accordance with the revised IFRS 3 – Business Combinations, Vivendi elected to account for the acquisition of GVT under the full goodwill method and performed
an allocation of the purchase price for the 100% interest acquired in GVT. The Statement of Financial Position of Vivendi recognized 100% of the fair value of
identifiable assets acquired and liabilities assumed based on analyses and estimates prepared with the assistance of a third-party appraiser. The purchase price and
its allocation were finalized within the 12-month period following the acquisition date prescribed by accounting standards with no significant impact compared to the
preliminary allocation presented as of December 31, 2009.
As of November 13, 2009
Fair value of net
Carrying value of
net assets before assets acquired at the
acquisition date
acquisition
(in IFRS)
(in IFRS)
ASSETS
Goodwill
Other intangible assets
Deferred tax assets
Other non-current assets
Non-current assets
Inventories
Current tax receivables
Current assets
TOTAL ASSETS (A)
Non-current liabilities
Current provisions
Current tax payables
Current liabilities
TOTAL LIABILITIES (B)
NET ASSETS (A-B)
Goodwill
Purchase price for 100% of GVT
6
34
776
69
43
928
1
1
208
279
489
1,417
6
119
125
1
325
156
3
485
610
807
(a, b) 396
(b) 776
69
43
1,284
1
1
208
279
489
1,773
6
222
119
347
1
325
158
3
487
834
939
(c) 2,099
(c) 3,038
(a) Fair value of intangible assets, and property, plant and equipment are composed of:
Customer bases
GVT and other trade names
Other
Total intangible assets
Life
4-5 years
Indefinite
As of November 13,
2009
240
122
34
396
(b) In 2010, the company performed, with the assistance of a third-party appraiser, an analysis of property, plant and equipment, and intangible assets that
constitute its network equipment. This analysis notably included a physical inventory and a review of useful lives of the assets, which did not have any
significant impact on the consolidated statement of financial position as of November 13, 2009. In addition, it induced an increase in useful lives of certain
assets, which represented a retroactive impact from January 1, 2010 of +€38 million, recognized in the fourth quarter of 2010.
(c) As of November 13, 2009, goodwill attributable to 100% of the share capital of GVT amounted to €2,116 million based on the estimated purchase price
according to the purchase commitment relating to non-controlling interests as of this date (17.55%). In 2010, the purchase price was adjusted to
-€17 million in order to include the decrease in purchase price of non-controlling interests over the period.
192
2.2. Sale of NBC Universal
At the conclusion of the NBC Universal transaction completed in May 2004, Vivendi held an equity interest in NBC Universal of 20%, and General Electric (GE) owned
the remaining 80%. Pursuant to various agreements entered into between Vivendi and GE, Vivendi and GE shared governance rights and each had a right to receive
any dividends paid by NBC Universal pro rata to its then-current interest. In December 2009, Vivendi agreed that it would sell its 20% interest in NBC Universal to GE
(as amended, the “2009 Agreement”). The 2009 Agreement was entered into in connection with GE’s concurrent agreement with Comcast Corporation (“Comcast”) to
form a new joint venture that would own 100% of NBC Universal and certain Comcast assets (the “Comcast Transaction”). Pursuant to the 2009 Agreement, Vivendi
agreed to sell its 20% interest in NBC Universal to GE for $ 5,800 million, in two transactions, the second of which was contingent upon the completion of the
Comcast Transaction. On September 26, 2010, Vivendi sold a 7.66% interest in NBC Universal to GE for $2,000 million. The remainder of Vivendi’s interest, or 12.34%
of NBC Universal, was sold to GE on January 25, 2011 for $3,800 million (which includes an additional $222 million received in relation to the previously sold 7.66%
interest), in advance of the closing of the Comcast Transaction. In addition, Vivendi received its pro rata share of dividends for the period from January 1, 2010 to
January 25, 2011 (the date of sale), totaling approximately $390 million, of which approximately $300 million was received in 2010.
The accounting treatment applied by Vivendi with respect to the sale of its interest in NBC Universal was as follows:
• In accordance with the 2009 Agreement, while Vivendi’s interest in NBC Universal was reduced to 12.34% following the sale of a 7.66% interest in NBC
Universal, Vivendi’s governance rights in NBC Universal did not change (including in terms of proportionate membership on the board of directors) until
Vivendi sold its entire interest in NBC Universal on January 25, 2011. As a result, until the latter date, Vivendi continued to exercise significant influence
over NBC Universal and therefore accounted for its 12.34% interest in NBC Universal under the equity method.
• On September 26, 2010, the sale to GE of a 7.66% interest in NBC Universal resulted in a capital loss of €232 million, mostly comprised of foreign currency
translation adjustments reclassified to earnings for €281 million, representing the foreign exchange loss attributable to the decline of the US dollar since
January 1, 2004. As of December 31, 2010, the residual balance of the foreign currency translation adjustments related to Vivendi’s remaining 12.34%
interest in NBC Universal represented a potential foreign exchange loss of €404 million.
• On January 25, 2011, the sale of the remaining 12.34% interest in NBC Universal to GE resulted in a capital loss estimated at €357 million, which is
expected to be accounted for in the 2011 first quarter earnings and mostly comprised of the aforementioned foreign currency translation adjustments.
• Starting December 2009, after Vivendi had agreed that it would sell its 20% interest in NBC Universal to GE for a total amount of $5,800 million, Vivendi
1.33 dollar/Euro. From an accounting perspective, these forward contracts were qualified as net investment hedges in NBC Universal. On September 26, 2010,
forward sales contracts for a nominal value of $2,000 million were unwound for €1,425 million. On January 25, 2011, forward sales contracts for a nominal
value of $3,800 million were unwound for €2,921 million.
2.3. Acquisition of a 51% interest in Sotelma by Maroc Telecom in July 2009
On July 31, 2009, following an international call for tenders, Maroc Telecom acquired a 51% controlling interest in Sotelma, the incumbent Malian telecoms operator,
for a total enterprise value of €312 million (representing a purchase price of €278 million plus the assumption of €43 million in net debt, net of cash acquired for
€9 million). The company has been fully consolidated since August 1, 2009.
Purchase price allocation
Carrying value of Sotelma's net assets and liabilities before acquisition
Fair value adjustments of Sotelma's assets and assumed liabilities as at acquisition date
License, depreciated over 8 years
Mobile customer base, depreciated over 8 years
Deferred tax, net
Total fair value adjustments of Sotelma's assets and liabilities
Adjusted net asset value as at acquisition date
Purchase price of 51% of Sotelma
Fair value of Sotelma's non-controlling interests
Goodwill (100%)
Of which goodwill of Sotelma's non-controlling interests
August 1, 2009
35
24
2
(3)
23
58
278
206
426
177
193
2.4. Agreements to end litigation over telecommunication assets in Poland
As a reminder, due to the legal proceedings which opposed Vivendi and its subsidiary Elektrim Telekomunikacja (Telco) against Deutsche Telekom and Elektrim SA
(Elektrim), the legal uncertainty regarding the ownership of Telco’s stake in Polska Telefonia Cyfrowa (PTC), a mobile telecommunication operator prevented Telco from
exercising joint control over PTC, as accordance with PTC’s by-laws. As a result, Vivendi did not consolidate its stake in PTC, whose carrying value was decreased to
zero since the year ended December 31, 2006.
On December 14, 2010, Vivendi signed certain agreements with Deutsche Telekom, Mr. Solorz-Zak (the main shareholder of Elektrim) and the creditors of Elektrim,
including the Republic of Poland and Law Debenture Trust Company (LDTC), and Elektrim’s bondholders (the “Bondholders”) in order to put an end to the litigation
regarding the ownership of PTC share capital (please refer to Note 27).
The completion of the agreements was notably conditional upon Elektrim’s full exit from bankruptcy and upon the ratification of the relevant documentation ending the
litigation by Elektrim after its exit from bankruptcy. In order to guarantee both the ratification of these relevant agreements by Elektrim and the provision of certain
documents necessary for the final completion of the agreements, Mr. Solorz-Zak granted, to Vivendi, the Republic of Poland, and the Bondholders, a personal
guarantee of €675 million counter-guaranteed by pledges on the participation of Polaris Finance BV (a company controlled by Mr. Solorz-Zak) in Polsat Cyfrowy for
around 57% of its capital. On January 14, 2011, the date of final completion of the agreements, the guarantee expired and the pledges were raised. Moreover, as part
of the agreement concluded with LDTC, Vivendi and Deutsche Telekom each committed to compensate LDTC up to a maximum of €50 million if the latter were to
exercise its pledge on the Polstat Cyfrowy options and were to recover an amount of less than €100 million. The agreements notably provided the opportunity for
Vivendi and Deutsche Telekom to exercise stock purchase options on Elektrim instead of paying the guaranteed amount, if LDTC ever called the guarantee. As these
agreements have been fulfilled, the proceedings among the parties were annulled at the final completion date of the agreements.
On January 14, 2011, the conditions precedents were satisfied and the agreements became effective. Under these agreements:
• Vivendi and Telco relinquished all of their rights over PTC shares and put an end to all PTC related legal proceedings between the parties;
• Vivendi, Telco and VTI received a net proceed of €1,254 million, of which €600 million was from Deutsche Telekom and €670 million from Elektrim and
Telco paid Elektrim approximately €16 million. In its Financial Statements for the first quarter ended March 31, 2011, the proceeds received from Deutsche
Telekom and Elektrim will be recognized as a net gain of €1,254 million, which will be classified as other financial income; and
• Finally, Vivendi received approximately €7 million with respect to the Elektrim bonds that it owns.
With respect to these agreements, Vivendi notably took the following commitments:
• Vivendi granted a guarantee over Carcom for a capped amount of €600 million maturing in August 2013;
• Vivendi committed to compensate Elektrim for the tax consequences of the transaction, within the limit of €20 million maturing in July 2011;
• Vivendi committed to compensate LDTC against any recourse for damages that could be brought against LDTC in connection with the completed
transaction, for an amount up to 18.4% for the first €125 million, 46% between €125 and €288 million and 50% thereafter; and
• Vivendi committed to compensate Elektrim’s administrator for the consequences of any action for damages that may be taken against it, in connection
with the decisions that were agreed in order to end certain procedures.
194
Note 3. Segment data
3.1. Operating segment data
The Vivendi group comprises six businesses operating at the heart of the worlds of content, platforms and interactive networks. Each business offers different
products and services that are marketed through different channels. Given the unique customer base, technology, marketing and distribution requirements of each of
these businesses, they are managed separately and represent the base of the internal reporting of the group. As of December 31, 2010, the Vivendi group had six
businesses engaging in the operations described below:
• Activision Blizzard: development, publishing and distribution of interactive entertainment software, online or on other media (such as console and PC);
• Universal Music Group: sale of recorded music (physical and digital media), exploitation of music publishing rights as well as artist services and merchandising;
• SFR: a telecommunication operator (mobile, broadband Internet and fixed telecommunications) in France;
• Maroc Telecom Group: a telecommunication operator (mobile, fixed telecommunications and Internet) in Africa, predominantly in Morocco as well as
in Mauritania, Burkina Faso, Gabon and since August 1, 2009, in Mali;
• GVT: a Brazilian fixed and broadband operator. GVT has been fully consolidated since November 13, 2009; and
• Canal+ Group: publishing and distribution of premium and thematic pay-TV in metropolitan France, Poland, Africa, French overseas territories and
Vietnam as well as cinema film production and distribution in Europe, and the organization of sporting events.
Vivendi Management evaluates the performance of the operating segments and allocates necessary resources to them based on certain operating indicators
(segment earnings and cash flow from operations). Segment earnings correspond to the EBITA of each business segment.
Additionally, segment data is prepared according to the following principles:
• the Holding & Corporate operating segment includes the cost of Vivendi SA’s headquarters in Paris and of its New York City offices, after the allocation
of a portion of these costs to each of the businesses;
• the non-core operations and others operating segment includes miscellaneous businesses outside Vivendi’s core businesses, whose assets are being
divested or liquidated and which are not disclosed as discontinued operations as they do not comply with criteria prescribed by IFRS 5, as well as Vivendi
Mobile Entertainment (which operates a service selling digital content on the Internet and on mobile phones under the “zaOza” brand) and Wengo (a French
leader in expert advisory services by phone);
• intersegment commercial relations are conducted on an arm’s length basis on terms and conditions similar to those which would be offered by third
parties; and
• information on the operating segments presented hereunder is identical to the information given to Vivendi’s Management Board.
Vivendi also presents data categorized according to six geographic areas, consisting of its five main geographic markets (France, Rest of Europe, United States,
Morocco and Brazil), as well as the rest of the world.
195
Consolidated Statements of Earnings
External revenues
Intersegment revenues
Revenues
Operating expenses excluding amortization and
depreciation as well as charges related to sharebased compensation plans
Charges related to stock options and other sharebased compensation plans
EBITDA
Gains/(losses) on sales of tangible and
intangible assets
Other non-recurring items
Depreciation of tangible assets
Amortization of intangible assets excluding those
acquired through business combinations
Adjusted earnings before interest and income
taxes (EBITA)
Impairment losses of intangible assets acquired
through business combinations
Earnings before interest and income taxes
(EBIT)
Interest
Earnings
Of which
Non-core
Canal+ Holding & operations
Group Corporate and others
SFR
Maroc
Telecom
Group
GVT
4,437
12
4,449
12,571
6
12,577
2,796
39
2,835
1,029
1,029
4,699
13
4,712
-
(2,336)
(3,867)
(8,587)
(1,166)
(597)
(3,784)
(93)
901
(2)
(11)
571
(60)
(17)
3,973
(26)
(2)
1,667
-
(1)
431
-
(1)
(51)
(40)
(15)
(856)
8
(1)
(294)
(155)
-
(604)
692
471
(92)
Activision
Blizzard
Universal
Music
Group
3,330
3,330
Eliminations
Total
Vivendi
16
3
19
(73)
(73)
28,878
28,878
(117)
(49)
73
(20,430)
(8)
920
-
(6)
(123)
(2)
(1)
(31)
-
-
(139)
8,309
(90)
(134)
(1)
(150)
(1)
(1)
1
(1)
-
(9)
(1)
(1,527)
(96)
(20)
(79)
-
(2)
-
(956)
2,472
1,284
277
690
(127)
(33)
-
5,726
(296)
(98)
(28)
(57)
(32)
-
-
-
(603)
(217)
(35)
-
-
-
-
-
-
-
(252)
383
140
2,374
1,256
220
658
(127)
(33)
-
4,871
195
(492)
7
(17)
(1,042)
3,522
As of December 31, 2010, income from equity affiliates is mainly comprised of the group’s share in earnings of NBC Universal for €201 million (compared to
€178 million in 2009). This investment is allocated to the Holding & Corporate business segment (please refer to Note 2.2).
2,198
1,324
196
External revenues
Intersegment revenues
Revenues
Operating expenses excluding amortization and
depreciation as well as charges related to sharebased compensation plans
Charges related to stock options and other sharebased compensation plans
EBITDA
Gains/(losses) on sales of tangible and
intangible assets
Other non-recurring items
Depreciation of tangible assets
Amortization of intangible assets excluding those
acquired through business combinations
Adjusted earnings before interest and income
taxes (EBITA)
Impairment losses of intangible assets acquired
through business combinations
Earnings before interest and income taxes
(EBIT)
Interest
Earnings
Of which
Non-core
operations and
others
Eliminations
Total
Vivendi
-
8
1
9
(54)
(54)
27,132
27,132
(3,675)
(127)
(35)
54
(19,295)
40
-
(8)
870
(1)
(9)
(136)
(2)
(26)
-
-
(154)
7,683
(91)
3
(4)
(271)
(19)
(3)
(131)
49
(1)
(1)
-
(2)
46
(1,377)
(559)
(95)
(1)
(83)
(1)
(2)
-
(869)
580
2,530
1,244
20
652
(91)
(29)
-
5,390
(188)
(287)
(98)
(23)
(7)
(31)
-
-
-
(634)
(302)
(618)
-
-
-
-
-
-
-
(920)
(6)
(325)
2,432
1,221
13
621
(91)
(29)
-
3,836
171
(458)
7
(795)
(675)
2,086
SFR
Maroc
Telecom
Group
GVT
4,349
14
4,363
12,427
(2)
12,425
2,662
32
2,694
104
104
4,544
9
4,553
(2,248)
(3,682)
(8,438)
(1,080)
(64)
(114)
676
(8)
(1)
680
(59)
(20)
3,967
(20)
(2)
1,612
(1)
(1)
(55)
8
1
(50)
(9)
(849)
(128)
-
484
Activision
Blizzard
Universal
Music
Group
3,038
3,038
Canal+ Holding &
Group Corporate
830
1,256
197
Consolidated Statements of Financial Position
December 31, 2010
Segment assets (a)
incl. investments in equity affiliates (b)
Unallocated assets (c)
Total Assets
Segment liabilities (d)
Unallocated liabilities (e)
Total Liabilities
Increase in tangible and intangible assets
Net industrial investments (capex, net) (f)
December 31, 2009
Segment assets (a)
incl. investments in equity affiliates (b)
Unallocated assets (c)
Total Assets
Segment liabilities (d)
Unallocated liabilities (e)
Total Liabilities
Increase in tangible and intangible assets
Net industrial investments (capex, net) (f)
GVT
Canal+
Group
Holding &
Corporate
Non-core
operations
and others
6,060
-
4,501
-
7,537
11
2,976
2,779
117
-
7,606
1,607
452
2,881
302
6
42
38
1,956
1,974
585
556
535
482
219
229
1
1
2
2
4,338
(2)
7,423
98
19,711
17
5,849
-
3,632
-
7,475
-
4,147
4,033
77
-
1,806
2,535
7,710
1,571
307
3,052
564
(14)
48
48
41
20
1,645
1,703
519
486
71
71
223
231
1
1
2
2
SFR
Maroc
Telecom
Group
7,679
96
20,029
18
2,206
2,494
80
75
Activision
Blizzard
Universal
Music
Group
4,372
2
Total
Vivendi
53,271
2,906
5,722
58,993
17,554
13,266
30,820
3,420
3,357
52,652
4,146
5,473
58,125
17,531
14,606
32,137
2,550
2,562
Additional operating segment data is presented in Note 9 “Goodwill”, Note 10 “Content assets and commitments”, Note 11 “Other intangible assets” and Note 13
“Intangible and tangible assets of telecom operations”.
(a) Segment assets include goodwill, content assets, other intangible assets, property, plant and equipment, investments in equity affiliates, financial assets,
inventories and trade accounts receivable and other.
(b) The Holding & Corporate operating segment includes the interest in NBC Universal (please refer to Note 2.2).
(c) Unallocated assets include deferred tax assets, current tax receivables, cash and cash equivalents as well as assets held for sale.
(d) Segment liabilities include provisions, other non-current liabilities and trade accounts payable.
(e) Unallocated liabilities include borrowings and other financial liabilities, deferred tax liabilities, current tax payables as well as liabilities associated with
assets held for sale.
(f) Relates to cash used for capital expenditures, net of proceeds from sales of property, plant and equipment, and intangible assets.
198
3.2. Geographical information
Revenues are broken down by the customers’ location.
2010
Revenues
France
Rest of Europe
United States
Morocco
Brazil (a)
Rest of the World
Segment assets
France
Rest of Europe
United States
Morocco
Brazil
Rest of the World
17,097
3,061
3,375
2,296
1,084
1,965
28,878
59%
10%
12%
8%
4%
7%
100%
December 31, 2010
27,543
1,747
12,936
4,610
4,533
1,902
53,271
2009
16,898
3,046
3,153
2,248
147
1,640
27,132
62%
11%
12%
8%
1%
6%
100%
December 31, 2009
52%
3%
24%
9%
9%
3%
100%
27,073
1,876
13,800
4,485
(b) 3,632
1,786
52,652
(a) Mainly relates to revenues of GVT which has been consolidated since November 13, 2009 (please refer to Note 2.1).
(b) Only relates to segment assets of GVT.
In 2010 and 2009, capital expenditures were mainly realized in France by SFR and Canal+ Group, in Morocco by Maroc Telecom SA and in Brazil by GVT.
51%
4%
26%
9%
7%
3%
100%
199
Note 4. EBIT
Breakdown of revenues and cost of revenues
2010
Product sales, net
Services revenues
Other
Revenues
Cost of products sold, net
Cost of service revenues
Other
Cost of revenues
7,683
21,169
26
28,878
(5,342)
(9,220)
1
(14,561)
2009
7,378
19,734
20
27,132
(4,972)
(8,632)
(23)
(13,627)
Personnel costs and average employee numbers
(in millions of euros except number of employees)
Annual average number of full-time equivalent employees
Salaries
Social security and other employment charges
Capitalized personnel costs
Wages and expenses
Share-based compensation plans
Other
Personnel costs
Note
21.1
20.1
2010
54,561
2,349
633
(218)
2,764
139
71
295
3,269
2009
48,210
2,203
552
(163)
2,592
154
20
190
2,956
The increase in the average number of full time equivalent employees primarily reflected the consolidation of GVT since November 13, 2009, as well as the acquisition
of 5 sur 5 by SFR in August 2009.
Additional information on operating expenses
Research and development expenditures amounted to -€835 million in 2010 (compared to -€786 million in 2009) and comprised all internal or external net costs
brought to earnings for the periods reported.
Advertising costs amounted to -€874 million in 2010 (compared to -€800 million in 2009).
Amortization and depreciation of tangible and other intangible assets
Amortization (excluding intangible assets acquired through business combinations)
of which property, plant and equipment
content assets
other intangible assets
Amortization of intangible assets acquired through business combinations
of which content assets
other intangible assets
Impairment losses of intangible assets acquired through business combinations (a)
Amortization and depreciation of tangible and intangible assets
Note
12
10
11
10
11
9-10
2010
2,483
1,527
187
769
603
379
224
252
3,338
2009
2,246
1,377
168
701
634
466
168
920
3,800
(a) In 2010, impairment losses of intangible assets acquired through business combinations primarily related to the impairment of certain UMG content
assets (€35 million) and Activision Blizzard (€217 million). In 2009, they primarily related to the impairment loss of UMG’s goodwill (€616 million) and the
impairment loss of certain content assets of Activision Blizzard (€302 million).
200
Note 5. Financial charges and income
Interest
2010
Interest expense on borrowings
Interest income from cash and cash equivalents
Interest
Premium related to early redemption of borrowings and fees related to issuance or cancellation of lines of credit
521
(29)
492
43
535
2009
486
(28)
458
14
472
Other capital gain on the divestiture of businesses
Downside adjustment on the divestiture of businesses
Other capital gain on financial investments
of which the consolidation gain on the dilution of UMG's interest in Vevo by 49.9%
Downside adjustment on financial investments
of which the capital loss on the sale of 7.66% interest in NBC Universal (a)
the depreciation of the minority stake in NBC Universal
Other
of which the settlement with the Brazilian CVM
Other charges and income related to financial investing activities
Reserve accrued regarding the Securities Class Action in the United States
Effect of undiscounting assets and liabilities (b)
Financial components of employee benefits
Premium related to early redemption of borrowings and fees related to issuance or cancellation of lines of credit
Change in value of derivative instruments
Other
Other charges and income related to financing activities
Note
2.2
2.2
27
27
20.2
2010
3
(9)
45
(242)
(232)
(102)
(67)
(305)
450
(47)
(27)
(43)
(13)
(32)
288
(17)
2009
23
(26)
72
56
(95)
(82)
(80)
(106)
(550)
(56)
(25)
(14)
(13)
(31)
(689)
(795)
(a) Relates to the capital loss incurred on the sale of a 7.66% interest in NBC Universal that was completed at the end of September 2010 as the first step in
the sale process of a 20% interest in NBC Universal, as agreed with General Electric in December 2009. This capital loss notably included -€281 million
related to foreign currency translation adjustment reclassified to earnings, which represented a foreign exchange loss attributable to the decline in the
value of the US dollar since January 1, 2004.
(b) In accordance with accounting principles, when the effect of the time value of money is material, financial assets or liabilities (mainly trade accounts
receivable and payable, as well as provisions) are recorded on the balance sheet in an amount corresponding to the present value of the expected income
or expenses, as applicable. At each subsequent period-end, the present value of such financial assets or liabilities is adjusted to account for the passage
of time.
201
Note 6. Income taxes
6.1. Consolidated global profit tax system
On May 19, 2008, Vivendi applied to the French Ministry of Finance for the renewal of its authorization to use the Consolidated Global Profit Tax System under Article
209 quinquies of the French tax code. Authorization was granted by an order dated March 13, 2009, for a three-year period beginning with the taxable year 2009 and
ending with the taxable year 2011.
Under the Consolidated Global Profit Tax System, Vivendi is entitled to consolidate its own tax profits and losses with the tax profits and losses of subsidiaries that
are at least 50% directly or indirectly owned by it, and that are located in France or abroad. Subsidiaries in which Vivendi directly or indirectly owns at least 50%
of the outstanding shares, either French or abroad, as well as Canal+ SA, fall within the scope of the Consolidated Global Profit Tax System (Activision Blizzard,
Universal Music Group, SFR, Maroc Telecom, GVT and Canal+ Group). Under Vivendi’s authorization to use the Consolidated Global Profit Tax System, Vivendi is
entitled to use ordinary losses carried forward.
The benefit provided by the Consolidated Global Profit Tax System related to the assessment of losses carried forward is as follows:
• as of December 31, 2009, Vivendi carried forward losses of €6,168 million as the head company consolidating for tax purposes the results of its French and
foreign subsidiaries (based on tax results converted in accordance with French tax rules for the latter) in which it held at least a 50% equity interest, as
well as of Canal+ SA;
• on February 22, 2011, the date when the Management Board approves the Financial Statements for the year ended December 31, 2010, the 2010 tax
results converted in accordance with French tax rules of the tax group companies, as of December 31, 2010 and, as a consequence, the amount of ordinary
tax losses available for carry forward at such date, cannot be determined with sufficient certainty;
• therefore, before the impact of (i) 2010 tax results and (ii) the potential consequences of the ongoing tax audit for fiscal years 2006, 2007, 2008 and 2009
(please refer to Note 6.6 below), and after taking into account (iii) the consequences of the tax audit for fiscal years 2004 and 2005, on the amount of
ordinary tax losses carried forward, Vivendi SA is expected to achieve tax savings of €2,056 million (undiscounted value based on the current income tax
rate of 33.33%); and
• the period during which losses will be utilized cannot be determined with sufficient precision given the uncertainty associated with economic activity. As
a result, Vivendi SA values its tax losses carried forward under the Consolidated Global Profit Tax System based on one year’s forecast results, taken from
the following year’s budget.
The impact of the Consolidated Global Profit Tax System on the Consolidated Financial Statements for the years ended December 31, 2010 and 2009 is as follows:
Current tax assets
Deferred tax assets
December 31,
2008
Income/
(charges) in
statement of
earnings
Collections
438
212
650
181
292
473
(435)
(435)
December 31,
2009
Income/
(charges) in
statement of
earnings
Collections
December 31,
2010
184
504
(a) 688
(b) 577
(3)
574
(182)
(182)
579
501
1,080
(a) As of December 31, 2009, current tax assets related to the 2009 expected tax savings which decreased due to SFR’s utilization in 2009 of Neuf Cegetel’s
ordinary losses carried forward. Deferred tax assets related to the 2010 expected tax savings which increased due to the almost full utilization of Neuf
Cegetel’s losses carried forward by SFR in 2009.
(b) Relates to the expected tax savings as of December 31, 2010, for 2010 (€579 million) and the -€2 million difference between the 2009 forecasted tax
savings as of December 31, 2009 and the effective 2009 tax savings received in 2010.
202
6.2. Provision for income taxes
(Charge)/Income
Current
Use of tax losses:
Tax savings related to the Consolidated Global Profit Tax System
Tax savings related to the US tax group
Adjustments to prior year's tax expense
Other income taxes items
Deferred
Impact of the Consolidated Global Profit Tax System
Impact of the US tax group
Tax savings related to the utilization of Neuf Cegetel's ordinary losses carried forward
Other changes in deferred tax assets
Impact of the change(s) in tax rates
Reversal of tax liabilities relating to risks extinguished over the period
Other deferred tax income/(expenses)
Note
2010
2009
6.1
577
3
(1,728)
(1,148)
181
19
26
(902)
(676)
6.1
(3)
(76)
(41)
(16)
5
237
106
(1,042)
292
(750)
43
82
334
1
(675)
6.3. Provision for income taxes and income tax paid by geographical area
(Charge)/Income
Current
France
United States
Morocco
Brazil
Other jurisdictions
Deferred
France
United States
Morocco
Brazil
Other jurisdictions
Income tax (paid)/collected
France
of which SFR
United States
Morocco
Brazil
Other jurisdictions
Income tax paid
2010
2009
(382)
(244)
(344)
(64)
(114)
(1,148)
(36)
(204)
(341)
(4)
(91)
(676)
(109)
99
6
33
77
106
(1,042)
(372)
337
3
(1)
34
1
(675)
(792)
(593)
(167)
(301)
(59)
(46)
(1,365)
435
76
(168)
(316)
(5)
(83)
(137)
203
6.4. Effective tax rate
(in millions of euros, except %)
Earnings from continuing operations before provision for income taxes
Elimination:
Earnings before provision for income taxes
French statutory tax rate
Theoretical provision for income taxes based on French statutory tax rate
Reconciliation of the theoretical and effective provision for income taxes
Permanent differences
of which other differences from tax rates
impacts of the changes in tax rates
Consolidated Global Profit Tax System
of which current tax savings
changes in related deferred tax assets
Other tax losses
of which use of current losses of the period
use of unrecognized ordinary losses
unrecognized tax losses
Restatements in respect of the provision for income taxes of previous years
Capital gain or loss on the divestiture or on the depreciation of financial investments or businesses
of which the depreciation of the goodwill related to UMG
the depreciation of the minority stake in NBC Universal
Effective provision for income taxes
Effective tax rate
Note
6.1
2010
2009
4,564
2,761
(195)
4,369
33.33%
(1,456)
(171)
2,590
33.33%
(863)
(14)
14
(16)
574
577
(3)
(104)
3
85
(192)
(42)
(1,042)
23.8%
1
32
473
181
292
(74)
18
105
(197)
22
(234)
(216)
(28)
(675)
26.1%
6.5. Deferred tax assets and liabilities
Changes in deferred tax assets/(liabilities), net
Opening balance of deferred tax assets/(liabilities)
Charges and income directly recorded in equity (a)
Business combinations
Changes in foreign currency translation adjustments and other
Closing balance of deferred tax assets/(liabilities)
2010
739
106
(5)
5
35
880
2009
890
1
48
(116)
(84)
739
(a) Includes -€9 million recognized in other items of comprehensive income for the year ended December 31, 2010 (compared to €9 million as of December 31, 2009).
204
Components of deferred tax assets and liabilities
Deferred tax assets
Deferred taxes, gross
Ordinary tax losses and tax credits carried forward (a)
of which Vivendi SA (b)
Vivendi Holding I Corp. (c)
SFR (d)
Temporary differences (e)
Netting
Deferred taxes, gross
Deferred taxes, unrecognized
Ordinary tax losses and tax credits carried forward (a)
of which Vivendi SA (b)
Vivendi Holding I Corp. (c)
SFR (d)
Temporary differences (e)
Deferred taxes, unrecognized
Recorded deferred tax assets
Purchase accounting asset revaluations (f)
Other
Netting
Recorded deferred tax liabilities
Deferred tax assets/(liabilities), net
December 31, 2010
December 31, 2009
3,328
2,332
500
55
1,605
(441)
4,492
3,749
2,679
426
144
1,793
(544)
4,998
(2,535)
(1,831)
(500)
(42)
(121)
(2,656)
1,836
(2,782)
(2,175)
(426)
(44)
(373)
(3,155)
1,843
926
471
(441)
956
880
1,119
529
(544)
1,104
739
(a) The amounts of ordinary tax losses and tax credits carried forward, as reported in this table, were estimated at the end of the relevant fiscal years.
In jurisdictions which are material to Vivendi, mainly the United States and France, the tax returns are respectively filed on September 15 and
November 30 of the following year, at the latest. Thus, the amounts of tax losses and tax credits carried forward reported in this table and those reported
to the tax authorities may differ significantly, and if necessary, may be adjusted at the end of the following year in the table above.
(b) Includes recognized deferred tax assets in respect of ordinary tax losses and tax credits carried forward by Vivendi SA as head of the tax group under the
Consolidated Global Profit Tax System (€2,909 million as of December 31, 2009), before their expected use in 2010 estimated at €577 million (please refer
to Note 6.1 above) and before the potential consequences of the ongoing tax audit for fiscal years 2006, 2007, 2008 and 2009 (please refer to Note 6.6
below), but after taking into account the consequences of the tax audit for fiscal years 2004 and 2005.
(c) Includes recognized deferred tax assets in respect of ordinary tax losses and tax credits carried forward by Vivendi Holding I Corp. in the United States
as head of the US tax group ($628 million as of December 31, 2009, before the impact of the loss expected in 2010 estimated at $29 million, as well as tax
credits generated in 2010 for $5 million (please refer to Note 6.6 below).
(d) Includes €76 million as of December 31, 2009 corresponding to the remaining deferred tax assets related to Neuf Cegetel’s ordinary tax losses carried
forward from prior years. These tax assets were fully consumed in 2010.
(e) Mainly includes the deferred tax assets related to non-deducted provisions upon recognition, including provisions relating to employee benefit plans and
share-based compensation plans.
(f) These tax liabilities, generated by asset revaluations following the purchase price allocation of company acquisition costs, are terminated upon the
amortization or divestiture of the underlying asset and generate no current tax charge.
205
Maturity of ordinary tax losses carried forward
Due to the timing of tax return filings, the ordinary tax losses carried forward reported for fiscal year 2009 in jurisdictions which are material to Vivendi are described
below together with their respective maturity periods:
• France: losses carried forward amounted to €6,168 million and can be carried forward indefinitely; and
• United States: losses carried forward amounted to $1,379 million and can be carried forward for a period of up to twenty years. No losses will mature prior
to June 30, 2021.
Maturity of tax credits carried forward
Due to the timing of tax return filings, the tax credit carried forward reported for fiscal year ended December 31, 2009 in jurisdictions which are material to Vivendi are
described below together with their respective maturity periods:
• France: tax credits carried forward amounted to €980 million, carried forward for a five-year period, of which €127 million matured as of December 31, 2010; and
• United States: tax credits carried forward amounted to $122 million and can be carried forward for a maximum period of ten years, of which $7 million matured on
December 31, 2010.
6.6. Tax audits
The fiscal year ended December 31, 2010 and prior years are open to tax audits by the respective tax authorities in the jurisdictions in which Vivendi has or had
operations. Various tax authorities have proposed or levied assessments for additional tax in respect of prior years. Vivendi’s management believes that the
settlement of any or all of these assessments will not have a material and unfavorable impact on the results of operations, financial position or liquidity of Vivendi.
In addition, in respect of the Consolidated Global Profit Tax System, the consolidated income reported for fiscal years 2006, 2007 and 2008 is under audit by the
French tax authorities. This tax audit started in January 2010. In addition, the tax audit by the French tax authorities regarding the consolidated income reported for
the fiscal year 2009 began in January 2011. Finally, the consequences of the tax audit for fiscal years 2004 and 2005 have not materially impacted the amount of
losses carried forward as reported above.
Vivendi’s US tax group was under tax audit for the fiscal years ended December 31, 2005, 2006 and 2007. This tax audit started in October 2009 and is currently
in progress as of the date of this report. In addition, as part of the tax audit for the fiscal years ended December 31, 2002, 2003 and 2004, Vivendi notably made
an affirmative claim before the tax authorities, which was favorably received by the tax authorities. Consequently, in 2009, ordinary losses carried forward of the
US tax group were increased by $975 million, all other things being equal.
Moreover, Maroc Telecom is under a tax audit for the fiscal years ended December 31, 2005, 2006, 2007 and 2008. This tax audit is currently in progress.
Note 7. Earnings per share
Basic
Earnings attributable to Vivendi shareowners (in millions of euros)
Number of shares (in millions)
Weighted average number of shares outstanding restated (b)
Potential dilutive effects related to share-based compensation
Adjusted weighted average number of shares
Earnings attributable to Vivendi shareowners per share (in euros)
2010
Diluted
Basic
2009
Diluted
2,198
(a) 2,196
830
(a) 829
1,232.3
1,232.3
1.78
1,232.3
2.2
1,234.5
1.78
1,203.2
1,203.2
0.69
1,203.2
1.8
1,205.0
0.69
Earnings from discontinued operations are not applicable over the presented periods. Therefore, the caption “earnings from continuing operations attributable to
Vivendi shareowners” relates to earnings attributable to Vivendi shareowners.
(a) Only includes the potential dilutive effect related to employee stock option and restricted stock plans of Activision Blizzard for a non-material amount
(please refer to Note 21.3).
(b) Net of treasury shares (please refer to Note 18).
206
Note 8. Charges and income directly recognized in equity
Foreign currency translation adjustments (a)
Transferred to profit or loss as part of the NBC Universal transaction
Valuation gains/(losses) taken to equity
Transferred to profit or loss of the period
Net investment hedge instruments (b)
Other impacts
Foreign currency translation adjustments (a)
Net investment hedge instruments
Other impacts
Note
2.2
23
23
Note
23
23
Gross
Tax
1,794
281
2
2
41
41
(20)
(20)
(6)
1,811
(9)
(9)
(9)
Gross
Tax
(325)
8
8
(44)
(44)
(19)
(19)
(33)
(413)
9
9
9
Net
1,794
281
2
2
32
32
(20)
(20)
(6)
1,802
Net
(325)
8
8
(35)
(35)
(19)
(19)
(33)
(404)
(a) The change in foreign currency translation adjustments primarily resulted from fluctuations in the euro/dollar exchange rate (mainly at Activision Blizzard,
Universal Music Group and in relation to the investment in NBC Universal) and, in 2010, the euro/BRL exchange rate (at GVT). In 2010, the change in foreign
currency translation adjustments relating to the investment in NBC Universal was +€318 million (-€101 million in 2009) and the cumulative balance of foreign
currency translation adjustments relating to the investment in NBC Universal represented a potential unrealized foreign exchange loss of €404 million as of
December 31, 2010.
In addition, as of December 31, 2010, the change in foreign currency translation adjustments also included the currency translation adjustment for
-€281 million reclassified to profit or loss, realized at the end of September 2010 following the sale of a 7.66% interest in NBC Universal (please refer to
Note 2.2).
(b) As part of its interest rate and foreign currency risks management, Vivendi uses certain hedging derivative financial instruments, which are described in
Note 23. Notably, Vivendi’s investment in NBC Universal has been hedged using forward sales contracts denominated in US dollars for an aggregated
nominal value of $3,800 million as of December 31, 2010. From an accounting perspective, these forward sales contracts are qualified as net investment
hedges in NBC Universal: the change in fair value of these instruments was recognized as other items of comprehensive income for -€20 million for the
year ended December 31, 2010.
207
Note 9. Goodwill
Goodwill, gross
Impairment losses
Goodwill
December 31, 2010
December 31, 2009
37,518
(12,173)
25,345
36,105
(11,589)
24,516
Changes in goodwill
Activision Blizzard
of which Activision
Blizzard
SFR
of which Mobile
Broadband Internet and fixed
Maroc Telecom Group
of which Maroc Telecom SA
subsidiaries
GVT
Canal+ Group
of which Canal+ France
StudioCanal
Total
Activision Blizzard
of which Activision
Blizzard
SFR
of which Mobile
Maroc Telecom Group
of which Maroc Telecom SA
subsidiaries
GVT
Canal+ Group
of which Canal+ France
StudioCanal
Total
December 31,
2009
Impairment
losses
Changes in value of
commitments to purchase
non-controlling interests
Business
combinations
Divestitures, changes in
foreign currency translation
adjustments and other
December 31,
2010
2,096
2,048
45
3,652
9,170
6,982
2,188
2,407
1,764
643
2,150
5,012
4,694
165
29
24,516
-
(4)
(4)
(4)
(19)
(19)
4
1
1
(29)
(29)
(a) (17)
(17)
(17)
53
(24)
180
180
(1)
355
(1)
(1)
31
28
3
290
1
(1)
1
1
(b) 857
2,257
2,209
44
4,011
9,170
6,982
2,188
2,409
1,792
617
2,423
4,992
4,689
149
83
25,345
December 31,
2008
Impairment
losses
Changes in value of
commitments to purchase
non-controlling interests
Business
combinations
Divestitures, changes in
foreign currency translation
adjustments and other
December 31,
2009
2,161
2,113
44
4,406
9,050
6,907
2,143
1,968
1,773
195
na
5,027
4,709
164
22,612
(616)
(616)
(7)
(7)
(19)
(19)
(26)
(4)
(4)
(19)
120
75
45
456
(c) 456
(a) 2,116
4
4
29
2,702
(61)
(61)
1
(119)
(10)
(9)
(1)
34
1
(156)
2,096
2,048
45
3,652
9,170
6,982
2,188
2,407
1,764
643
2,150
5,012
4,694
165
29
24,516
na: not applicable.
(a) As of November 13, 2009, goodwill attributable to 100% of the share capital of GVT amounted to €2,116 million based on the estimated purchase price
according to the purchase commitment relating to non-controlling interests as of this date (17.55%). In 2010, the purchase price was adjusted to
-€17 million in order to include the decrease in purchase price of non-controlling interests over the period. Since June 11, 2010, Vivendi holds a 100%
controlling interest in GVT (please refer to Note 2.1).
(b) Relates to foreign currency translation adjustments, mainly due to fluctuations in the euro/dollar or the euro/BRL exchange rate.
(c) Relates to goodwill attributable to the acquisition of Sotelma (please refer to Note 2.3).
208
Goodwill impairment test
During the fourth quarter of 2010, Vivendi tested the value of goodwill allocated to its cash-generating units (CGU) or groups of CGU applying valuation methods
consistent with previous years. Vivendi ensures that the recoverable amount of CGU or groups of CGU exceed their carrying value (including goodwill). The recoverable
amount is determined as the higher of the value in use determined by the discounted value of future cash flows (discounted cash flow method (DCF)) and the fair value
(less costs to sell), determined on the basis of market data (stock market prices, comparable listed companies, comparison with the value attributed to similar assets
or companies in recent transactions). For a description of the methods used for the impairment test, please refer to Note 1.3.5.7.
Vivendi performed such test on the basis of an internal valuation of recoverable amounts, except in the case of Activision Blizzard (AB) and Universal Music Group
(UMG) for which Vivendi required the assistance of independent experts. As a result, Vivendi’s management concluded that the recoverable amount exceeded their
carrying value as of December 31, 2010 for each cash generating unit (CGU) or group of CGU tested.
As of December 31, 2009, Vivendi’s management concluded that the carrying value exceeded the recoverable amount of UMG and consequently recorded an
impairment loss of €616 million. At year-end 2010, UMG has launched a significant reorganization plan leading to cost optimization, redeployment of resources
towards key initiatives such as further expanding the company’s creative investments, including maintaining high investment in local artists and talents, support and
development of new digital platforms and services, and a more global approach. By the end of 2011, cost savings are expected to reach €100 million globally on a full
year basis. Based on this and after taking into account a risk factor associated with implementation, Vivendi’s management concluded that the carrying value was at
least equal to the recoverable amount of UMG as of December 31, 2010. The recoverable amount was determined using usual valuation methods (DCF and stock
market multiples) using financial assumptions consistent with previous years (discount rate of 9.50%, compared to 8.50% as of December 31, 2009 and perpetual
growth rate of 1.00%, unchanged compared to 2009 – please refer to the table below).
CGU or groups of CGU tested
Operating Segments
Cash Generating Units (CGU)
CGU or groups of CGU tested
Activision Blizzard
Activision
Blizzard
Distribution
Recorded music
Artist services and merchandising
Music publishing
Mobile
Mobile
Fixed and Internet
Onatel
Gabon Telecom
Mauritel
Sotelma
GVT
French Pay-TV
Canal+ Overseas
StudioCanal
Other entities
Activision
Blizzard
Distribution
SFR
Maroc Telecom Group
GVT
Canal+ Group
Mobile
Maroc Telecom
Onatel
Gabon Telecom
Mauritel
Sotelma
GVT
Canal+ France
StudioCanal
Other entities
209
Key assumptions used for the determination of recoverable amounts
The value in use of each CGU or group of CGU is determined as the discounted value of future cash flows by using cash flow projections consistent with the 2011
budget and the most recent forecasts prepared by the operating segments. These forecasts are prepared for each operating segment on the basis of the financial
targets as well as the following main key assumptions: discount rate, perpetual growth rate, and EBITA as defined in Note 1.2.3, capital expenditures, competitive
environment, regulatory environment, technological development and level of commercial expenses.
The main assumptions used are presented in the following table.
Valuation Method
2010
Operating segments
CGU or groups of CGU
tested
Activision Blizzard
Activision
DCF, stock market
price & comparables
model
DCF, stock market
price & comparables
model
Blizzard
DCF, stock market
price & comparables
model
DCF & comparables
model
DCF & comparables
model
DCF
DCF, stock market
price & comparables
model
DCF & comparables
model
DCF & comparables
model
DCF
DCF
Stock market price
DCF
DCF
DCF
DCF
(a)
DCF
DCF
Stock market price
DCF
DCF
DCF
DCF
(a)
DCF & comparables
model
DCF
Distribution
SFR
Mobile
Broadband Internet
and fixed
Maroc Telecom
Onatel
Gabon Telecom
Mauritel
Sotelma
GVT
Canal+ France
Maroc Telecom Group
GVT
Canal+ Group
StudioCanal
DCF
2009
Discount Rate (b)
2010
2009
Perpetual Growth Rate
2010
2009
11.00%
11.50%
4.00%
4.00%
11.00%
11.50%
4.00%
4.00%
13.50%
13.00%
2.00%
4.00%
9.50%
7.00%
8.50%
7.00%
1.00%
0.50%
1.00%
0.50%
8.00%
na
14.00%
15.50%
14.00%
14.00%
(a)
8.00%
na
14.00%
15.50%
14.00%
14.00%
(a)
0.50%
na
4.50%
2.50%
2.00%
4.50%
(a)
0.50%
na
4.50%
2.50%
2.50%
4.50%
(a)
8.50%
8.50% - 9.00%
8.50%
8.50% - 9.00%
1.50%
0.00% - 1.00%
1.50%
0.00% - 1.00%
na: non applicable.
DCF: Discounted Cash Flows.
(a) No goodwill impairment test regarding GVT was undertaken as of December 31, 2009 nor as of December 31, 2010, given that the purchase price
allocation date was close to the closing date, and considering that no triggering event had occurred between those dates.
(b) The determination of recoverable amounts using a post-tax discount rate applied to post-tax cash flows provides recoverable amounts consistent with the
ones that would have been obtained using a pre-tax discount rate applied to pre-tax cash flows.
210
Sensitivity of recoverable amounts
The following tables show the changes in the discount rate and in the perpetual growth rate for each principal CGU or group of CGU used for the tests as of
December 31, 2010 and December 31, 2009 that would have been required in order for the recoverable amount to equal the carrying value.
December 31, 2010
Discount Rate
Activision Blizzard
Activision
Blizzard
SFR
Mobile
Maroc Telecom Group
GVT
Canal+ Group
Canal+ France
StudioCanal
Applied Rate
(in %)
Change in the discount rate in order for
the recoverable amount to be equal to
the carrying amount (in points)
Applied Rate
(in %)
Change in the perpetual growth rate in
order for the recoverable amount to be
equal to the carrying amount (in points)
11.00%
11.00%
9.50%
+9.56 points
(a)
(b)
4.00%
4.00%
1.00%
-22.70 points
(a)
(b)
7.00%
8.00%
(c)
(d)
+5.01 points
+1.14 point
na
na
0.50%
0.50%
(c)
(d)
-13.12 points
-1.80 point
na
na
8.50%
9.00%
+0.37 point
+1.63 point
1.50%
0.00%
-0.46 point
-2.05 points
December 31, 2009
Discount Rate
Activision Blizzard
Activision
Blizzard
SFR
Mobile
Maroc Telecom Group
GVT
Canal+ Group
Canal+ France
StudioCanal
Applied Rate
(in %)
Change in the discount rate in order for
the recoverable amount to be equal to
the carrying amount (in points)
Applied Rate
(in %)
Change in the perpetual growth rate in
order for the recoverable amount to be
equal to the carrying amount (in points)
11.50%
11.50%
8.50%
+4.15 points
(a)
(b)
4.00%
4.00%
1.00%
-6.15 points
(a)
(b)
7.00%
8.00%
(c)
(d)
+6.00 points
+1.15 point
na
na
0.50%
0.50%
(c)
(d)
-33.30 points
-2.20 points
na
na
8.50%
9.00%
+0.25 point
+1.30 point
1.50%
0.00%
-0.35 point
-1.95 point
na: not applicable.
(a) As of December 31, 2010, as in 2009, Blizzard’s recoverable amount significantly exceeded its carrying value, hence the increase in the discount rate or
the decrease in the perpetual growth rate, respectively, that would have been required in order for Blizzard’s recoverable amount to equal its carrying
value, was not relevant.
(b) As of December 31, 2009, UMG’s carrying value equalled to its recoverable amount due to the recognition of an exceptional goodwill impairment loss
of €616 million (please refer to the foregoing). As of December 31, 2010, UMG’s carrying value was at least equal to the recoverable amount. a significant
decrease in the recoverable amount would generate an additional goodwill impairment loss, if any.
(c) As of December 31, 2010, as in 2009, Maroc Telecom was valued based on its stock market price.
(d) No goodwill impairment test regarding GVT was undertaken as of December 31, 2009 nor as of December 31, 2010, given that the purchase price
allocation date was close to the closing date, and considering that no triggering event had occurred between those dates.
211
Note 10. Content assets and commitments
10.1. Content assets
December 31, 2010
Internally developed franchises and other games content assets
Games advances
Music catalogs and publishing rights
Advances to artists and repertoire owners
Merchandising contracts and artists services
Film and television costs
Sports rights
Content assets
Deduction of current content assets
Content assets,
gross
Accumulated
amortization and
impairment losses
Content assets
772
101
6,277
485
52
5,138
312
13,137
(1,058)
12,079
(545)
(4,360)
(31)
(4,385)
(9,321)
26
(9,295)
227
101
1,917
485
21
753
312
3,816
(1,032)
2,784
December 31, 2009
Internally developed franchises and other games content assets
Games advances
Music catalogs and publishing rights
Advances to artists and repertoire owners
Merchandising contracts and artists services
Film and television costs
Sports rights
Content assets
Deduction of current content assets
Content assets,
gross
Accumulated
amortization and
impairment losses
Content assets
1,197
92
5,776
495
50
4,928
299
12,837
(1,029)
11,808
(674)
(3,739)
(17)
(4,207)
(8,637)
25
(8,612)
523
92
2,037
495
33
721
299
4,200
(1,004)
3,196
Changes in main content assets
Opening balance of internally developed franchises and other games content assets
Amortization, net (a)
Acquisitions/Internal developments
Impairment
Closing balance of internally developed franchises and other games content assets
2010
523
(242)
83
(b) (215)
78
227
2009
1,031
(310)
126
(b) (302)
(22)
523
(a) Includes €88 million recorded under “Amortization of intangible assets acquired through business combinations” in the Consolidated Statement of
Earnings (€183 million in 2009).
(b) At year-end 2009, following the lower than expected performance of certain games, in particular the Guitar Hero franchise, Activision Blizzard’s
Management performed an impairment test on relevant assets or group of assets, by comparing their recoverable value, determined as the discounted
value of future cash flows. As a result, as of December 31, 2009, an impairment loss of €302 million was recognized on these assets. At year-end 2010,
according to the decision of Activision Blizzard’s Management to discontinue the Guitar Hero franchise and based on the lower than expected
performance in certain other games, Activision Blizzard’s Management performed an impairment test on relevant assets or group of assets. As a result,
as of December 31, 2010, an impairment loss of €215 million (including the full impairment of Guitar Hero franchise) was recognized on these assets.
212
Opening balance of music catalogs and publishing rights
Amortization, net (a)
Purchases of catalogs
Impairment of catalogs
Closing balance of music catalogs and publishing rights
2010
2,037
(285)
10
(27)
182
1,917
2009
2,339
(277)
15
14
(2)
(52)
2,037
(a) This amortization is recorded in “Amortization of intangible assets acquired through business combinations” in the Consolidated Statement of Earnings.
Opening balance of payments to artists and repertoire owners
Payments to artists and repertoire owners
Recoupment of advances, net
Closing balance of payments to artists and repertoire owners
Opening balance of film and television costs
Acquisition of coproductions and catalogs
Consumption of coproductions and catalogs
Acquisition of film and television rights
Consumption of film and television rights
Other
Closing balance of film and television costs
Opening balance of sports rights
Rights acquisition (a)
Rights accrual, net (a)
Consumption of broadcasting rights
Other
Closing balance of sports rights
2010
495
578
(624)
36
485
2010
721
70
(109)
700
(671)
42
753
2010
299
646
42
(676)
1
312
2009
459
624
1
(584)
(5)
495
2009
716
67
(113)
667
(645)
4
25
721
2009
285
712
(62)
(636)
299
(a) Mainly relates to the rights to broadcast the French Professional Soccer League 1 which were awarded to Canal+ Group in 2008 for four seasons between
2008-2009 and 2011-2012. As of December 31, 2010, these rights were recognized as follows: for the 2010-2011 season, the rights are accrued upon the
start of the broadcasting period (August 1, 2010) for €465 million. For the remaining season (2011-2012), €465 million was recognized as given off balance
sheet commitments (see below) and will be recorded in the Statement of Financial Position upon the start of the season or upon first payment.
213
10.2. Contractual content commitments
Commitments given recorded in the Statement of Financial Position: content liabilities
Content liabilities are part of “Trade accounts payable and other” or part of “Other non-current liabilities” whether they are current or non-current, as applicable
(please refer to Note 16). Content liabilities related to share-based compensation plans are recorded as provisions (please refer to Note 21).
Minimum future payments as of December 31, 2010
Due in
Total
2011
2012-2015
After 2015
Total - minimum
future payments
as of
December 31, 2009
Games royalties
Music royalties to artists and repertoire owners
Film and television rights (a)
Sports rights
Creative talent, employment agreements and others
Total content liabilities
43
1,417
213
379
56
2,108
43
1,391
213
379
20
2,046
26
32
58
4
4
40
1,306
213
379
126
2,064
After 2015
Total - minimum
future payments
as of
December 31, 2009
174
30
204
-
2,326
1,304
886
4,516
(77)
(30)
204
(92)
(199)
4,317
Off balance sheet commitments given/(received)
Due in
Total
2011
Sports rights
Creative talent, employment agreements and others (b)
Total given
Sports rights
Creative talent, employment agreements and others (b)
Other
Total received
Total net
2,011
730
918
3,659
(70)
(22)
901
627
439
1,967
(47)
(18)
(131)
(223)
3,436
(73)
(138)
1,829
2012-2015
936
103
449
1,488
(23)
(4)
not available
(58)
(85)
1,403
(a) Primarily includes contracts valid over several years for the broadcast of future film and TV productions and co-productions (mainly exclusivity contracts
with major US studios and pre-purchases in the French movie industry), StudioCanal film production and coproduction commitments (given and received)
and broadcasting rights of CanalSat and Cyfra+ multichannel digital TV packages. They are recorded as content assets when the broadcast is available for
initial release. As of December 31, 2010, provisions recorded relating to film and television rights amounted to €184 million, compared to €296 million as of
December 31, 2009.
In addition, this amount does not include commitments given in relation to channel right contracts for which Canal+ Group did not grant minimum
guarantees. The variable amount of these commitments cannot be reliably determined and is not reported in balance sheet and in commitments given and
is instead recorded as an expense of the period when incurred. Based on the estimation of the future subscriber number at Canal+ France, commitments
in relation to channel right contracts would have increased by €174 million as of December 31, 2010, compared to €406 million as of December 31, 2009.
In addition, according to the agreement entered into with cinema professional organizations on December 18, 2009, Canal+ SA has to invest, every year
for a five-year period (2010-2014), 12.5% (compared to 12% according to the previous agreement before December 18, 2009) of its annual revenues in the
financing of European films.
In terms of audiovisual, according to the agreements with producers and authors’ organizations, Canal+ France has to invest every year a percentage of its
revenues in the financing on heritage work.
Agreements with cinema organizations and with producers and authors’ organizations are not recorded as off balance sheet commitments as the future
estimate of these commitments cannot be reliably determined.
(b) Mainly relates to UMG which routinely commits to artists and other parties to pay agreed amounts upon delivery of content or other products (“Creative
talent and employment agreements”). Until the artist or the other party has delivered his or her content or the repayment of an advance, UMG discloses
its obligation as an off balance sheet commitment. While the artist or the other party is obligated to deliver his or her content or other product to UMG
(these arrangements are generally exclusive), UMG does not report these obligations (or the likelihood of the other party’s failure to meet its obligations)
as an offset to its off balance sheet commitments.
214
Note 11. Other intangible assets
December 31, 2010
Software
Telecom licenses
Customer bases
Trade names
Other
Other
intangible
assets, gross
Accumulated
amortization and
impairment losses
Other
intangible
assets
4,541
1,698
1,006
485
1,830
9,560
(3,208)
(599)
(475)
(52)
(818)
(5,152)
1,333
1,099
531
433
1,012
4,408
December 31, 2009
Software
Telecom licenses
Customer bases
Trade names
Other
Other
intangible
assets, gross
Accumulated
amortization and
impairment losses
Other
intangible
assets
4,314
1,339
976
445
1,655
8,729
(2,812)
(496)
(287)
(52)
(740)
(4,387)
1,502
843
689
393
915
4,342
Software includes acquired software, net for €676 million as of December 31, 2010 (€910 million as of December 31, 2009), primarily includes SFR software amortized
over 4 years, as well as SFR’s internally developed software.
Trade names relate to trade names acquired from GVT in 2009 and Activision in 2008.
Other intangible assets notably include indefeasible rights of use (IRU) and other long-term occupational rights, net for €393 million as of December 31, 2010
(€424 million as of December 31, 2009).
Changes in other intangible assets
Opening balance
Depreciation
Impairment losses
Acquisitions
Increase related to internal developments
Divestitures/Decrease
Changes in foreign currency translation adjustments
Other
Closing balance
December 31,
2010
4,342
(993)
(2)
(a) 805
276
(19)
27
83
(111)
4,408
(a) Includes €300 million related to the acquisition of 3G mobile telephony spectrum by SFR.
(b) Primarily relates to intangible assets acquired in 2009 upon the takeover of GVT (€396 million).
The amortization charge is accounted for in cost of revenues and in selling, general and administrative expenses. It mainly consists of telecom licenses
(SFR: -€66 million in 2010, compared to -€71 million in 2009; Maroc Telecom Group: -€7 million in 2010, compared to -€5 million in 2009), internally developed
software (-€210 million in 2010, unchanged compared to 2009) and acquired software (-€269 million in 2010, compared to -€311 million in 2009).
2009
3,872
(883)
490
288
(4)
(b) 432
(5)
152
4,342
215
Note 12. Property, plant and equipment
December 31, 2010
Land
Buildings
Equipment and machinery
Construction-in-progress
Other
Property, plant and
equipment, gross
Accumulated
depreciation and
impairment losses
Property, plant and
equipment
189
2,576
12,290
270
4,317
19,642
(2)
(1,488)
(6,998)
(2,937)
(11,425)
187
1,088
5,292
270
1,380
8,217
December 31, 2009
Land
Buildings
Other
Property, plant and
equipment, gross
Accumulated
depreciation and
impairment losses
Property, plant and
equipment
181
2,341
10,745
240
4,084
17,591
(2)
(1,360)
(6,145)
(2,820)
(10,327)
179
981
4,600
240
1,264
7,264
As of December 31, 2010, other property, plant and equipment notably included set-top boxes, net for €669 million, compared to €599 million as of December 31, 2009.
In addition, property, plant and equipment financed pursuant to finance leases amounted to €68 million, compared to €79 million as of December 31, 2009.
Changes in property, plant and equipment
Opening balance
Depreciation
Acquisitions/Increase
Divestitures/Decrease
Changes in foreign currency translation adjustments
Other
Closing balance
2010
7,264
(1,527)
2,339
(67)
2
169
37
8,217
2009
6 317
(1,385)
1,772
(135)
(a) 913
(2)
(216)
7,264
(a) Mainly corresponds to the acquisitions of GVT (€776 million) and Sotelma (€98 million). Please refer to Note 2.
The depreciation charge is accounted for in cost of revenues and in selling, general and administrative expenses. It mainly consists of the depreciation of buildings
(-€128 million in 2010, compared to -€140 million in 2009) and equipment and machinery (-€1,007 million in 2010, compared to -€981 million in 2009).
216
Note 13. Intangible and tangible assets of telecom operations
December 31, 2010
Other intangible assets, net
Software
Telecom licenses
Customer bases
Trade names
Other
Property, plant and equipment, net
Land
Buildings
Other
Intangible and tangible assets of telecom operations, net
SFR
Maroc Telecom
Group
GVT
Total
1,008
885
287
897
3,077
213
214
3
1
54
485
39
208
141
14
402
1,260
1,099
498
142
965
3,964
47
809
2,286
220
679
4,041
7,118
128
221
1,639
117
2,105
2,590
13
1,213
97
1,323
1,725
175
1,043
5,138
220
893
7,469
11,433
SFR
Maroc Telecom
Group
GVT
Total
1,174
648
385
796
3,003
218
195
2
1
54
470
25
237
124
10
396
1,417
843
624
125
860
3,869
40
753
2,217
207
635
3,852
6,855
127
165
1,499
111
1,902
2,372
13
757
68
838
1,234
167
931
4,473
207
814
6,592
10,461
December 31, 2009
Other intangible assets, net
Software
Telecom licenses
Customer bases
Trade names
Other
Property, plant and equipment, net
Land
Buildings
Other
Intangible and tangible assets of telecom operations, net
SFR holds licenses for its networks and for the supply of its telecommunications services in France for a period of 15 years for GSM (between March 2006 and March
2021) and 20 years for UMTS (between August 2001 and August 2021).
In March 2006, the French Government authorized SFR to continue using its GSM license over the 15-year period commencing April 1, 2006 and ending March 31,
2021 for an annual payment comprised of a (i) fixed portion in an amount of €25 million for each year (capitalized over the period based on a present value of
€278 million in 2006) and (ii) a variable portion equal to 1% of the yearly revenues generated by the 2G technology.
Upon the acquisition of the UMTS license, the fixed amount paid, i.e., €619 million, was recorded as an intangible asset and the variable part of the fee equals to 1% of
the yearly revenues.
The variable parts of these fees cannot reliably be determined and they are not recorded in the Statement of Financial Position. They are recorded as an expense
when incurred.
217
In addition, on November 30, 2009, the “Autorité de Régulation des Communications Electroniques et des Postes” or “Arcep” (the French Telecommunications
Regulatory Body) addressed a notice to SFR regarding its compliance by December 31, 2013, with its undertakings in terms of UMTS network coverage, within the
following schedule:
• 84% coverage of the French metropolitan population as of June 30, 2010;
• 88% coverage of the French metropolitan population as of December 31, 2010;
• 98% coverage of the French metropolitan population as of December 31, 2011; and
• 99.3% coverage of the French metropolitan population as of December 31, 2013.
As of December 31, 2010, SFR honors and exceeds its commitments relating to UMTS network coverage (3G) fixed by Arcep for this date: SFR covers 92% of the
French metropolitan population.
Note 14. Investments in equity affiliates
Voting interest
December 31, 2010
December 31, 2009
NBC Universal (a)
Other
12.34%
na
Value of equity affiliates
December 31, 2010
December 31, 2009
20.00%
na
2,779
127
2,906
4,033
113
4,146
na: not applicable.
Changes in value of equity affiliates
NBC Universal (a)
Other
(en millions d’euros)
NBC Universal (a)
Other
December 31,
2009
Changes in
scope of
consolidation
Impairment
losses
Income from
equity affiliates
4,033
113
4,146
(1,629)
(3)
(1,632)
-
201
(6)
195
December 31,
2008
Changes in
scope of
consolidation
Impairment
losses
Income from
equity affiliates
4,342
99
4,441
39
39
(d) (82)
(28)
(110)
178
(7)
171
Changes in foreign
currency translation
adjustments and
Dividends
other
received
(b) (299)
(2)
(301)
December 31,
2010
(c) 473
25
498
2,779
127
2,906
Changes in foreign
currency translation
adjustments and
Dividends
other
received
December 31,
2009
(306)
(306)
(c) (99)
10
(89)
4,033
113
4,146
(a) At the conclusion of the NBC Universal transaction completed in May 2004, Vivendi held an equity interest in NBC Universal of 20%, and General Electric
(GE) owned the remaining 80%. Pursuant to various agreements entered into between Vivendi and GE, Vivendi and GE shared governance rights and each
had a right to receive any dividends paid by NBC Universal pro rata to its then-current interest. In December 2009, Vivendi agreed that it would sell its
20% interest in NBC Universal to GE (as amended, the “2009 Agreement”). The 2009 Agreement was entered into in connection with GE’s concurrent
agreement with Comcast Corporation (“Comcast”) to form a new joint venture that would own 100% of NBC Universal and certain Comcast assets (the
“Comcast Transaction”). Pursuant to the 2009 Agreement, Vivendi agreed to sell its 20% interest in NBC Universal to GE for $5,800 million, in two
transactions, the second of which was contingent upon the completion of the Comcast Transaction. On September 26, 2010, Vivendi sold a 7.66% interest
in NBC Universal to GE for $2,000 million. The remainder of Vivendi’s interest, or 12.34% of NBC Universal, was sold to GE on January 25, 2011 for
$3,800 million (which includes an additional $222 million received in relation to the previously sold 7.66% interest), in advance of the closing of the
Comcast Transaction. In addition, Vivendi received its pro rata share of dividends for the period from January 1, 2010 to January 25, 2011 (the date of
sale), totaling approximately $390 million, of which approximately $300 million was received in 2010. For a detail of the accounting treatment applied by
Vivendi with respect to the sale of its interest in NBC Universal, please refer to Note 2.2.
(b) Includes the dividend received from NBC Universal in 2010 of €233 million, as well as the dividend received of €66 million on January 25, 2011 with
respect to the fourth quarter 2010.
(c) Includes changes in foreign currency translation adjustments (+€318 million in 2010, compared to -€101 million in 2009).
(d) As of December 31, 2009, based on the economics of the agreement with GE and the valuation of Vivendi’s interest in NBC Universal at $5.8 billion,
Vivendi Management concluded that the carrying value of its interest exceeded the recoverable amount, which generated a $118 million recognition of
impairment (representing €82 million) as of this date.
218
Financial information relating to NBC Universal shares
The table below shows condensed information relating to Vivendi’s equity in the stand-alone financial statements of NBC Universal shares. The equity is calculated by
applying Vivendi’s ownership interests to this affiliate as of December 31, 2010 and December 31, 2009, respectively, as presented in Note 28.
Vivendi’s ownership interests
Revenues
EBIT
Earnings
Total assets
Total liabilities
December 31, 2010
December 31, 2009
12.34%
1,536
205
136
3,954
1,734
20.00%
2,159
308
183
4,747
1,395
December 31, 2010
December 31, 2009
508
50
91
35
684
412
22
434
1,118
(622)
496
271
50
30
113
464
426
49
1
476
940
(464)
476
Note 15. Financial assets
Cash management financial assets (a)
Available-for-sale securities (b)
Other financial assets at fair value through profit or loss (c)
Other loans and receivables (d)
Cash deposits backing borrowings
Held-to-maturity investments
Financial assets at amortized cost
Financial assets
Deduction of current financial assets
Note
23
23
(a) Relates to US treasuries and government agency securities, with a maturity exceeding three months, held by Activision Blizzard for $672 million as of
December 31, 2010, compared to $389 million as of December 31, 2009.
(b) The available-for-sale securities do not include significant publicly quoted securities as of December 31, 2010 and as of December 31, 2009 and weren’t
the subject of significant impairment with respect to fiscal years 2010 and 2009.
(c) Other financial assets at fair value primarily include the Auction Rate Securities (ARS) held by Activision Blizzard for €18 million as of December 31, 2010
(€54 million as of December 31, 2009). The change was notably attributable to the put option exercised on June 30, 2010 by Activision Blizzard over a
portion of these ARS.
(d) Other loans and receivables notably include cash deposits relating to Qualified Technological Equipment (QTE) operations by SFR for €237 million as of
December 31, 2010 (€247 million as of December 31, 2009).
219
Note 16. Net working capital
Trade accounts receivable
Trade accounts receivable write-offs
Trade accounts receivable, net
of which past due receivables that are not impaired
Other
of which VAT to be received
social costs and other taxes
prepaid charges
December 31, 2010
December 31, 2009
5,753
(1,231)
4,522
1,416
2,189
827
176
331
6,711
5,561
(1,091)
4,470
1,419
1,997
826
87
338
6,467
Vivendi considers that there is not a significant risk of non-recovery of non-impaired past due receivables, as each operating segment applies a depreciation rate on
trade accounts receivable. Depreciation rates are based on historical observation of levels of bad debts for each customer group, primarily on the basis of statistics
relating to those business segments of the group whose business model is based on subscriptions (Activision Blizzard, SFR, GVT and Canal+ Group). For those
business segments a percentage of defaults measured on the basis of the bad debts in a given period in relation to the revenues for the same period is used. In
addition, the balance of the amount mentioned above is, notably, made up of receivables relating to the operational segments of SFR and Canal+ Group that are not
subject to contentious proceedings for their recovery, considering that their maturity is less than 30 days, 60 days or 120 days, according to the nature of the relevant
clients and business sectors in which they operate, and in respect of which the level of risk is, therefore, considered to be limited.
Trade accounts payable
Other
of which music royalties to artists and repertoire owners
game deferred revenues (b)
prepaid telecommunication revenues (c)
VAT to be paid
social costs and other taxes
Note
10.2
December 31, 2010
December 31, 2009
6,586
(a) 7,865
1,391
1,303
921
897
1,256
14,451
6,565
(a) 7,002
1,280
991
827
928
1,097
13,567
(a) Includes debt incurred in connection with the interim dividend to be paid to Vodafone by SFR for €440 million as of December 31, 2010, which was paid at
the end of January 2011 (the same amount was due as of December 31, 2009 with respect to fiscal year 2009 and was paid in January 2010).
(b) Relates to the impact of the change in deferred net revenues at Activision Blizzard, and related costs of sales associated with the sale of boxes for certain
games with significant online functionality (please refer to Note 1.3.4.1).
(c) Mainly includes subscriptions that are not past due and prepaid cards sold but not consumed, mobile phones held by distributors, roll-over minutes of
SFR’s mobile operations and the current portion of SFR’s deferred revenues of fixed operations.
Advance lease payments in respect of Qualified Technological Equipment operations
Liabilities related to SFR GSM license (a)
Prepaid revenues from indefeasible rights of use (IRU) and other long-term occupational rights (b)
Non-current content liabilities
Other
Total other non-current liabilities
Note
December 31, 2010
December 31, 2009
15
13
244
190
376
61
203
1,074
256
207
519
68
261
1,311
10.2
(a) Relates to the discounted value of the liability. The nominal value amounted to €256 million as of December 31, 2010, compared to €281 million as of
December 31, 2009.
(b) Relates to deferred revenues associated with indefeasible right of use (IRU) agreements, leases or services contracts.
220
Note 17. Cash and cash equivalents
Cash
Cash equivalents (a)
of which UCITS
certificates of deposit and term deposits
Cash and cash equivalents (b)
December 31, 2010
December 31, 2009
461
2,849
1,986
863
3,310
718
2,628
1,948
680
3,346
(a) A review of the historical performance of these investments during fiscal years 2010 and 2009 confirmed their accounting treatment as cash equivalents.
As reported in Note 1.3.5.8, marketable securities under this section are recorded at fair value through profit or loss.
(b) Mainly includes Activision Blizzard’s cash and cash equivalents for €2,124 million as of December 31, 2010 (compared to €1,925 million as of December 31,
2009), invested, if any, in money market funds with initial maturity dates not exceeding 90 days.
Note 18. Equity
Share capital of Vivendi SA
(in thousands)
Common shares outstanding (nominal value: €5.5 per share)
Treasury shares
Voting rights
December 31, 2010
December 31, 2009
1,237,337
(80)
1,237,257
1,228,859
(80)
1,228,779
As of December 31, 2010, Vivendi SA held approximately 80,000 treasury shares, representing a net carrying value of approximately €2 million (unchanged compared
to December 31, 2009), held to hedge certain share purchase options granted to executives and employees. As these share purchase options expired in 2010, these
treasury shares will be cancelled during the first half year 2011.
In addition, as of December 31, 2010, outstanding stock options and performance shares plans represented 50.8 million potential new shares to be issued in favour
of their beneficiaries (of which 48.9 million shares due to stock options and 1.8 million performance shares, compared to 41.3 million shares due to stock option and
1.1 million performance shares as of December 31, 2009; please refer to Note 21.2.2) if any, which would result in a potential share capital of €7,084 million divided
into 1,288.1 million shares (compared to €6,992 million divided into 1,271.2 million shares as of December 31, 2009).
December 31, 2010
December 31, 2009
SFR
Maroc Telecom Group
Activision Blizzard
GVT
Other
Total
1,612
1,207
895
(a) 401
4,115
1,420
1,152
1,058
4
337
3,971
(a) As of December 31, 2009, GVT was held at 82.45%. Since June 11, 2010, Vivendi holds a 100% controlling interest in GVT (please refer to Note 2.1).
Dividends paid to shareowners
Dividend proposed by Vivendi SA with respect to fiscal year 2010
On February 22, 2011, the date of Vivendi’s Management Board’s meeting which approved its Consolidated Financial Statements as of December 31, 2010 and the
appropriation of earnings, Vivendi’s Management Board decided to propose a dividend distribution of €1.40 per share to the shareholders of Vivendi, corresponding
to a total cash distribution of approximately €1.7 billion. This proposal was presented to the Vivendi’s Supervisory Board at its meeting held on February 28, 2011.
Dividend paid by Vivendi SA with respect to fiscal year 2009
At the Annual Shareholders’ Meeting held on April 29, 2010, the shareholders of Vivendi approved the recommendations of Vivendi’s Management Board relating
to the allocation of distributable earnings for fiscal year 2009. As a result, the dividend payment was set at €1.40 per share, representing a total distribution of
€1,721 million, which was paid in cash on May 11, 2010.
221
Dividend paid to subsidiaries’ non-controlling interests
Dividend payments to subsidiaries’ non-controlling interests mainly include SFR (€440 million in 2010 and €771 million in 2009), Maroc Telecom SA (€386 million in
2010 and €395 million in 2009) and Activision Blizzard (€58 million in 2010 for the first time).
Moreover, SFR’s Board of Directors, at a meeting held on December 6, 2010, decided to pay an interim dividend of €1 billion with respect to fiscal year 2010 (of which
€440 million was paid to Vodafone on January 28, 2011) and on February 9, 2011, Activision Blizzard announced that its Board of Directors had declared a dividend of
$0.165 per common share with respect to fiscal year 2010 to shareholders, which will be paid in cash on May 11, 2011
Activision Blizzard
Stock repurchase program of Activision Blizzard
On February 10, 2010, Activision Blizzard announced that its Board of Directors had authorized a new stock repurchase program under which Activision Blizzard can
repurchase shares of its outstanding common stock up to an amount of $1 billion. In 2010, Activision Blizzard repurchased approximately 86 million shares of its
common stock in connection with this program, for a total amount of $966 million, of which approximately 84 million shares were effectively paid in 2010
($944 million) and 1.8 million shares were paid in January 2011 ($22 million). In addition, in January 2010, Activision Blizzard settled a $15 million purchase of
1.3 million shares of its common stock that it had agreed to repurchase in December 2009 pursuant to the previous $1.25 billion stock repurchase program, completing
that program. In total, Activision Blizzard repurchased approximately 85 million shares of its common stock in 2010, for an amount of $959 million, or €726 million
(compared to $1.1 billion, or €792 million in 2009). As of December 31, 2010, Vivendi held an approximate 61% interest (non-diluted) in Activision Blizzard (compared
to an approximate 57% as of December 31, 2009).
In addition, on February 9, 2011, Activision Blizzard announced that its Board of Directors had authorized a new stock repurchase program under which Activision
Blizzard can repurchase shares of its outstanding common stock up to an amount of $1.5 billion. This program will end at the earlier of March 31, 2012 or on the date
of the Board of Directors’ decision to discontinue it.
Vivendi’s ownership interest in Activision Blizzard
Change in Vivendi’s ownership interest in Activision Blizzard is as follows:
• On July 9, 2008, out of the 1,315.4 million shares (after share-split by two and net of treasury shares) composing Activision Blizzard’s share capital at the
time of Vivendi’s take over, Vivendi held 716.5 million shares, or a 54.47% interest in Activision Blizzard. After the acquisition on the market of an
additional 2.1 million shares in the second half of the year 2008, Vivendi held 718.6 million shares, or a 54.76% interest in Activision Blizzard as of
December 31, 2008.
• From July 9, 2008 and December 31, 2010, Activision Blizzard issued approximately 59.0 million shares to beneficiaries of stock option and performance
share plans, of which (i) 5.5 million shares between July 9, 2008 and December 31, 2008, (ii) 35.1 million shares in fiscal year 2009 and (iii) 18.4 million
shares in fiscal year 2010. During the same period, Activision Blizzard repurchased approximately 199.2 million of its common shares on the market as
part of the stock repurchase program approved by Activision Blizzard’s Board of Directors, of which (i) 13.0 million shares between July 9, 2008 and
December 31, 2008, (ii) 100.7 million shares in fiscal year 2009 and (iii) 85.5 million shares in fiscal year 2010.
• As of December 31, 2010, out of the 1,183.3 million shares (net of treasury shares) composing Activision Blizzard’s share capital, Vivendi held 718.6 million
shares or a 60.73% interest in Activision Blizzard as of that date. In addition, as of December 31, 2010, the outstanding stock option and restricted share
plans represented 77.8 million potential new shares, if any, to be issued in favor of their beneficiaries (61.2 million shares due to stock options and
16.6 million restricted shares: please refer to Note 21.3.2). The stock repurchase program, approved in February 2011, for an amount of up to $1.5 billion
represented approximately 136.4 million share buy-back (assuming a share price of $11 per share).
Canal+ France
Acquisition by Vivendi of Canal+ France’s non-controlling interests
As part of the combination of the Canal+ Group and TPS pay-TV activities in France finalized in January 2007, TF1 and M6 were granted a put option by Vivendi over
their respective 9.9% and 5.1% interests in the share capital of Canal+ France. These options were exercisable in February 2010 at the market price determined by
an expert subject to a minimum price of €1,130 million for a 15% interest in the share capital of Canal+ France (corresponding to a valuation of €7.5 billion for 100%
of the share capital of Canal+ France).
• On December 28, 2009, the Vivendi/Canal+ Group acquired TF1’s 9.9% interest in the share capital of Canal+ France for €744 million, corresponding to the
minimum price of the option on that date.
• On February 22, 2010, M6 exercised its put option for €384 million, corresponding to the minimum price of the option on that date, and thus ceased to hold
an interest in share capital of Canal+ France as of that date.
In accordance with the accounting standards applicable at the date of the combination, to the extent that the put options initially granted to TF1 and M6 were
recorded as financial liabilities in Vivendi’s Financial Net Debt, these transactions have no impact on Vivendi’s Financial Net Debt. As a result of these transactions,
Canal+ Group (a wholly owned subsidiary of Vivendi) holds an 80% controlling interest in Canal+ France.
222
IPO process of Lagardère’s non-controlling interest in Canal+ France
On April 15, 2010, Lagardère decided to exercise its liquidity right regarding its 20% interest in Canal+ France. As Lagardère and Vivendi had not reached an
agreement regarding the sale of its interest, Lagardère decided on July 2, 2010, in accordance with the shareholders agreement signed on January 4, 2007, to launch
the Initial Public Offering (IPO) process for their 20% interest in Canal+ France. This IPO process is in progress: on February 16, 2011, Canal+ France filed the Initial
Public Offering (IPO) Prospectus with the French Autorité des Marchés Financiers (AMF). For a detail of the shareholders agreement, please refer to Note 26.5 to the
Consolidated Financial Statements for the year ended December 31, 2010.
Note 19. Provisions
Other employee provisions (a)
Employee benefits (b)
Restructuring costs
Litigations
Losses on onerous contracts
Contingent liabilities due to disposal
Cost of dismantling and restoring site (c)
Other
Provisions
Deduction of current provisions
Other employee provisions (a)
Employee benefits (b)
Restructuring costs
Litigations
Losses on onerous contracts
Contingent liabilities due to disposal
Cost of dismantling and restoring site (c)
Other
Provisions
Deduction of current provisions
Note
20
21
27
26.4
Note
20
21
27
26.4
December 31,
2009
Addition
Utilization
Reversal
Business
combinations
Divestitures,
changes in
foreign
currency
translation
adjusments
and other
409
80
69
558
39
890
505
129
125
407
2,653
(563)
2,090
29
8
11
48
62
91
90
8
10
171
480
(220)
260
(55)
(69)
(19)
(143)
(63)
(28)
(177)
(59)
(2)
(37)
(509)
170
(339)
(5)
(2)
(7)
(503)
(33)
(10)
(7)
(56)
(616)
87
(529)
2
2
2
49
2
4
55
4
(7)
9
(18)
(63)
39
19
(26)
(7)
432
16
63
511
42
443
394
50
63
526
2,029
(552)
1,477
December 31,
2009
409
80
69
558
39
890
505
129
125
407
2,653
(563)
2,090
December 31,
2008
Addition
Utilization
Reversal
Business
combinations
Divestitures,
changes in
foreign
currency
translation
adjusments
and other
418
97
76
591
151
384
565
137
104
372
2,304
(719)
1,585
11
42
6
59
78
619
141
1
14
126
1,038
(175)
863
(47)
(48)
(17)
(112)
(146)
(45)
(135)
(3)
(53)
(494)
258
(236)
(2)
(9)
(11)
(42)
(73)
(83)
(2)
(44)
(255)
131
(124)
4
4
7
8
2
21
(3)
18
25
(2)
4
27
(2)
(2)
17
(4)
(1)
4
39
(55)
(16)
(a) Includes employee deferred compensation.
(b) Excludes employee termination reserves recorded under restructuring costs.
(c) SFR is required to dismantle and restore each telephony antenna site following termination of a site lease.
December 31,
2010
223
Note 20. Employee benefits
20.1. Analysis of expenses related to employee benefit plans
The following table provides information about the cost of employee benefit plans excluding its financial component. The total cost of defined benefit plans is
disclosed in Note 20.2.2 below.
Note
Employee defined contribution plans
Employee defined benefit plans
2010
39
32
71
20.2.2
2009
20
20
20.2. Employee defined benefit plans
20.2.1. Assumptions used in the evaluation and sensitivity analysis
Discount rate, expected return on plan assets and rate of compensation increase
The assumptions underlying the valuation of defined benefit plans were made in compliance with accounting policies presented in Note 1.3.8 and have been applied
consistently for several years. Demographic assumptions (including notably the rate of compensation increase) are company specific. Financial assumptions (notably
including the discount rate and the expected rate of return on investments) are made as follows:
• determination by independent actuaries and other independent advisors of the discount rate for each country by reference to returns received on notes issued by
investment grade companies having a credit rating of AA and maturities identical to that of the valued plans, generally based on relevant rate indices, and as reviewed
by Vivendi’s Finance Department, representing, at year-end, the best estimate of expected trends in future payments from the first of benefit payments; and
• the expected return on plan assets as determined for each plan according to the portfolio composition and the expected performance of each component.
Pension benefits
2010
Discount rate (a)
Expected return on plan assets (b)
Rate of compensation increase
Expected average working life (in years)
4.6%
3.9%
1.8%
10.8
2009
Post-retirement benefits
2010
5.3%
4.4%
1.8%
11.6
4.8%
na
3.0%
6.3
2009
5.3%
na
3.5%
7.0
na: not applicable.
(a) A 50 basis point increase (or a 50 basis point decrease, respectively) in the 2010 discount rate would have led to an increase of €1 million in pre-tax
expense (or a decrease of €1 million, respectively) and would have led to a decrease in the obligations of pension and post-retirement benefits of
€49 million (or an increase of €54 million, respectively).
(b) A 50 basis point increase (or a 50 basis point decrease, respectively) in the expected return on plan assets for 2010 would have led to a decrease of
€1 million in pre-tax expense (or an increase of €1 million, respectively).
Assumptions used in accounting for the pension benefits, by country
United States
2010
Discount rate
Expected return on plan assets
na: not applicable.
4.75%
4.75%
na
2009
5.25%
5.25%
na
United Kingdom
2010
2009
5.00%
3.53%
4.50%
5.50%
4.15%
4.75%
Germany
2010
4.25%
na
1.75%
2009
5.25%
na
2.00%
France
2010
4.25%
4.62%
3.30%
2009
5.25%
4.42%
3.45%
224
Assumptions used in accounting for post-retirement benefits, by country
United States
2010
Discount rate
4.75%
3.50%
2009
5.25%
4.00%
Canada
2010
2009
5.00%
na
5.75%
na
Minimum
Maximum
4%
2%
86%
-
5%
2%
93%
6%
na: not applicable.
Pension plan assets
Weighted-average range of investment allocation by asset category
Equity securities
Real estate
Debt securities
Cash
Allocation of pension plan assets
December 31,
2010
Equity securities
Real estate
Debt securities
Cash
Total
4%
2%
93%
1%
100%
2009
5%
2%
88%
5%
100%
Pension plan assets, which were not transferred, are no longer exposed to stock market fluctuations. These assets do not include occupied buildings or assets used by
Vivendi nor shares or debt instruments of Vivendi.
Cost evolution of post-retirement benefits
For the purpose of measuring post-retirement benefits, Vivendi assumed the growth in the per capita cost of covered health care benefits would slow down from 8.0% for
categories under 65 years old and 65 years old and over in 2010, to 4.7% in 2020 for these categories. In 2010, a one-percentage-point increase in the assumed cost
evolution rates would have increased post-retirement benefit obligations by €11 million and the pre-tax expense by €1 million. Conversely, a one-percentage-point
decrease in the assumed cost evolution rates would have decreased post-retirement benefit obligations by €10 million and the pre-tax expense by less than €1 million.
Moreover, Vivendi took into account the impact of the US healthcare reforms (HCR) in its actuarial evaluations as of December 31, 2010. The recognized impacts of the
currently known applications resulted overall in a non-significant increase of its post-retirement benefits in the United States.
225
20.2.2. Analysis of the expense recorded and benefits paid
2010
Pension benefits
Current service cost
Amortization of actuarial (gains)/losses
Amortization of past service cost
Effect of curtailments/settlements
Adjustment related to asset ceiling
Impact on selling, administrative and general expenses
Interest cost
Impact on other financial charges and income
Net benefit cost
14
15
1
30
28
(9)
19
49
2009
12
(4)
1
(2)
(6)
1
27
(10)
17
18
2010
2009
2
2
8
8
10
2010
Total
(1)
(1)
8
8
7
14
17
1
32
36
(9)
27
59
2009
12
(5)
1
(2)
(6)
35
(10)
25
25
In 2010, benefits paid, including settlements related to external liabilities, amounted to (i) €36 million (€35 million in 2009) with respect to pensions, of which €9 million
(€15 million in 2009) was paid by pension funds, and (ii) €13 million (€11 million in 2009) with respect to post-retirement benefits.
20.2.3. Analysis of net benefit obligations with respect to pensions and post-retirement benefits
Benefit obligation, fair value of plan assets and funded status over a five year period
2010
Pension benefits
December 31,
2009
2008
Benefit obligation
Fair value of plan assets
Underfunded obligation
625
240
(385)
539
203
(336)
482
189
(293)
2007
2006
780
443
(337)
1,319
911
(408)
2010
December 31,
2009
2008
2007
2006
159
(159)
142
(142)
159
(159)
135
(135)
144
(144)
226
Changes in the value of the benefit obligations, the fair value of plan assets and the funded status
Changes in benefit obligation
Benefit obligation at the beginning of the year
Current service cost
Interest cost
Contributions by plan participants
Divestitures
Curtailments
Settlements
Transfers
Plan amendments
Experience (gains)/losses (a)
Actuarial (gains)/losses related to changes in actuarial assumptions
Benefits paid
Other (foreign currency translation adjustments)
Benefit obligation at the end of the year
of which wholly or partly funded benefits
wholly unfunded benefits (b)
Changes in fair value of plan assets
Fair value of plan assets at the beginning of the year
Experience (gains)/losses (c)
Contributions by employers
Contributions by plan participants
Divestitures
Settlements
Transfers
Benefits paid
Other (foreign currency translation adjustments)
Fair value of plan assets at the end of the year
Funded status
Underfunded obligation
Unrecognized actuarial (gains)/losses
Unrecognized past service cost
(Provision)/asset before asset ceiling
Adjustment related to asset ceiling
Net (provision)/asset recorded in the statement of financial position
of which assets related to employee benefit plans
provisions for employee benefit plans (d)
Note
19
Pension benefits
2010
2009
2010
2009
Total
2010
2009
539
14
28
(2)
58
(36)
24
625
361
264
482
12
27
4
(2)
(4)
2
44
(31)
5
539
295
244
142
8
2
(2)
10
(13)
12
159
159
135
8
1
(1)
11
(12)
142
142
681
14
36
2
(4)
68
(49)
36
784
361
423
617
12
35
1
4
(2)
(4)
1
55
(43)
5
681
295
386
203
9
9
43
(36)
12
240
189
10
3
34
(4)
(31)
2
203
12
1
(13)
-
11
1
(12)
-
203
9
9
55
1
(49)
12
240
189
10
3
45
1
(4)
(43)
2
203
(385)
117
1
(267)
(267)
5
(272)
(336)
78
3
(255)
(255)
5
(260)
(159)
(1)
(160)
(160)
(160)
(142)
(7)
(149)
(149)
(149)
(544)
116
1
(427)
(427)
5
(432)
(478)
71
3
(404)
(404)
5
(409)
(a) Includes the impact on the benefit obligation resulting from the difference between benefits estimated at the previous year-end and benefits paid during
the year. As a reminder, in 2008, 2007 and 2006, actual experience (gains)/losses in respect of benefit obligations amounted to €1 million, -€1 million, and
-€4 million, respectively.
(b) In accordance with local laws and practices, certain plans are not covered by pension funds. As of December 31, 2010, they principally comprise
supplementary pension plans in the United States, pension plans in Germany and post-retirement benefit plans in the United States.
(c) Includes the difference between the expected return on plan assets at the previous year-end and the actual return on plan assets during the year.
As a reminder, in 2008, 2007, and 2006 actual experience gains/(losses) in respect of plan assets amounted to -€43 million, -€24 million, and €24 million,
respectively.
(d) Includes a current liability of €34 million as of December 31, 2010 (compared to €37 million as of December 31, 2009).
227
Benefit obligation and fair value of plan assets detailed by country
Pension benefits
2010
Benefit obligation
US companies
UK companies
German companies
French companies
Other
Fair value of plan assets
US companies
UK companies
French companies
Other
December 31,
2009
2010
2009
120
178
110
162
55
625
110
154
102
120
53
539
139
20
159
126
16
142
58
127
45
10
240
53
98
43
9
203
-
-
Restructuring in the United Kingdom
In November 2008, Vivendi restructured its principal defined benefit pension plan in the United Kingdom covering Seagram Spirits and Wine and UMG beneficiaries,
as it existed as of December 31, 2007, by dividing it into three separate plans (retirees of Seagram Spirits and Wine and UMG, former non-retired employees of
Seagram Spirits and Wine; and former non-retired employees, and current employees of UMG), and by transferring pension obligations relating to Seagram Spirits and
Wine and UMG retirees outside the group.
The Seagram Spirits and Wine and UMG retirees plan therefore purchased an insurance policy for £135 million (€172 million) to cover its obligations. As the value of
pension liabilities and related plan assets (the insurance contract) were perfectly matched from this date, no liability was recorded in Vivendi’s Consolidated
Statement of Financial Position as of December 31, 2008. The settlement of this pension plan became effective at year-end 2009; consequently, Vivendi is legally
relieved from all obligations toward beneficiaries of this plan.
20.2.4. Additional information on pension benefits in France
Vivendi maintains ten pension plans in France, of which four make investments through insurance companies. The allocation of assets by category of the various plans was as follows:
Corporate Supplementary Plan
Corporate Management Supplementary Plan
SFR Supplementary Plan
Canal+ Group IDR* Plan
Equity securities
Real estate
Debt securities
Cash
Total
11.5%
11.5%
12.8%
13.0%
7.0%
7.0%
6.0%
12.0%
80.5%
80.5%
80.1%
75.0%
1.0%
1.0%
1.1%
-
100%
100%
100%
100%
IDR (Indemnités de départ en retraite)*: Indemnities payable on retirement
The asset allocation remains fairly stable over time. Contributions to the four plans amounted to €5 million in 2010 (compared to €5 million in 2009), and are
estimated to be €5 million for 2011.
Payments to all ten pension plans in France amounted to €5 million in 2010 (compared to €5 million in 2009), and are estimated to be €5 million in 2011.
In addition, Vivendi took into account the impact of the retirement reform in France (law n°2010-1330 of November 9, 2010) in its actuarial valuations as of
December 31, 2010 which generated a non-significant decrease in its French retirement obligations at that date.
Benefits estimation and future payments
For 2011, pension fund contributions and benefit payments to retirees by Vivendi are estimated at €36 million in respect of pensions, of which €15 million to pension
funds, and €13 million to post-retirement benefits.
Estimates of future benefit payments to beneficiaries by the relevant pension funds or by Vivendi (in nominal value) are as follows:
2011
2012
2013
2014
2015
2016-2020
Pension benefits
Post-retirement
benefits
27
18
19
39
20
180
13
13
12
12
12
58
228
Note 21. Share-based Compensation plans
21.1. Impact of the expense related to share-based compensation plans
Impact on the Consolidated Statement of Earnings
Charge/(Income)
Stock options, restricted stocks and performance shares
Vivendi "Stock appreciation rights" and "restricted stock units"
Employee stock purchase plans
Vivendi stock instruments
Activision Blizzard stock options, restricted stock units and performance shares
Blizzard employee cash-settled equity unit plan
Activision Blizzard stock instruments
UMG employee equity unit plan
Neuf Cegetel cash-settled restricted stock plans
Subtotal (including Activision Blizzard's capitalized costs)
of which
equity-settled instruments
cash-settled instruments
(-) Activision Blizzard’s capitalized costs (a)
Charges/(Income) related to stock options and other share-based compensation plans
Note
21.2
21.3
21.4
21.5
2010
2009
27
(5)
15
37
68
1
69
7
113
30
(9)
7
28
85
42
127
9
164
110
3
26
139
122
42
(10)
154
(a) Share-based compensation costs directly attributable to games development are capitalized as software development costs once the technological
feasibility of a product is established and such costs are deemed recoverable. Upon product release, capitalized software development costs are
amortized based on the ratio of current revenues to total projected revenues for the specific product, generally with an amortization period of six months
or less. In 2010, €41 million were capitalized and €67 million were amortized, representing a net impact of -€26 million. In 2009, €74 million were
capitalized and €64 million were amortized, representing a net impact of €10 million.
Statement of Financial Position
Vivendi "Stock appreciation rights" and "restricted stock units"
UMG employee equity unit plan
Blizzard employee equity unit plan
Provisions related to cash-settled instruments
Neuf Cegetel restricted stock plans
Payables related to cash-settled instruments
Liabilities related to cash-settled instruments
Note
December 31, 2010
December 31, 2009
21.2
21.4
21.3
19
21.5
9
7
16
38
38
54
20
60
80
66
66
146
21.2. Plans granted by Vivendi
21.2.1. Information on plans granted by Vivendi
Vivendi has granted to its employees several share-based compensation plans. During 2010 and 2009, Vivendi adopted equity-settled stock option plans and
performance share plans, wherever the fiscal residence of the employee, as well as stock purchase plans for its employees and retirees (employee stock purchase plan
and leveraged plan).
The accounting methods applied by Vivendi to value these granted plans are described in Note 1.3.10.
More precisely, the volatility applied in valuing the plans granted by Vivendi is calculated as the weighted average of (a) 75% of the historical volatility of Vivendi
shares computed on a 5-year period (4-year period as of December 31, 2009) and (b) 25% of the implied volatility based on Vivendi put and call options traded on a
liquid market with a maturity of 6 months or more.
The risk-free interest rate used is the rate of French “Obligations Assimilables du Trésor” (OAT) with a maturity corresponding to the expected term of the
instrument at the valuation date.
The expected dividend yield at grant date is based on Vivendi’s dividend distribution policy, which is currently an expected dividend of at least 50% of adjusted net income.
229
The vesting of stock options and performance shares is subject to the satisfaction of performance conditions. Since 2009, such performance conditions also include
external indicators, thus following AFEP and MEDEF recommendations.
For 2010 and 2009, these performance conditions are broken down as follows:
• External indicators: 20% (performance of Vivendi shares compared to three trading indices DJ Stoxx Media, DJ Stoxx Telco and CAC 40); and
• Internal indicators: 80% (adjusted net income: 50% and cash flow from operations (CFFO): 30%).
The objectives underlying the performance conditions are determined by the Supervisory Board upon proposal by the Human Resources Committee. The satisfaction
of the objectives is reviewed over one year for the stock options and over two years for performance shares.
For 2011, performance conditions will be broken down as follows:
• External indicators: 30% (performance of Vivendi shares compared to three trading indices DJ Stoxx Media, DJ Stoxx Telco and CAC 40); and
• Internal indicators: 70% (adjusted net income: 45% and cash flow from operations (CFFO): 25%)
Equity-settled instruments
For the main stock option and performance share plans granted in 2010 and 2009, the applied assumptions were as follows:
Grant date
Data at grant date:
Options strike price (in euros) (a)
Share price (in euros)
Expected volatility
Expected dividend yield
Performance conditions achievement rate
2010
2009
April 15,
April 16,
19.71
19.89
25%
7.04%
100%
20.02
19.57
29%
7.15%
100%
(a) In accordance with legal provisions, the number and strike price of active stock option plans, including the April 15, 2010 plan, as well as the number
of performance share in the 2009 and 2010 plans, were adjusted to take into account the impact, for beneficiaries, of the 2009 dividend distribution
by a withholding on reserves, which was approved by the Annual General Shareholders’ Meeting on April 29, 2010. This adjustment had no impact on
share-based compensation expense related to the relevant stock option and performance share plans.
Stock option plans
The value of the granted equity-settled instruments is estimated and fixed at grant date. Stock options granted in 2010 and 2009, vest at the end of a three-year
period and expire at the end of a ten-year period (with a 6.5 year expected term) and the compensation cost is therefore recognized on a straight-line basis over the
vesting period.
The number of options granted on April 15, 2010 was 5,297,200, compared to 6,561,120 options granted on April 16, 2009. After taking into account a 2.75% risk-free
interest rate (3.09% in 2009), the fair value of each option granted was €1.99, compared to €2.34 per option on April 16, 2009.
For 2010 and 2009, the Supervisory Board, upon recommendation of the Human Resources Committee, resolved that the 2010 and 2009 performance conditions were
satisfied. The number of stock options granted in 2010 and 2009 (indicated above) was therefore definitive.
Performance share plans
In 2010 and 2009, Vivendi set up performance share plans, pursuant to which shares granted vest at the end of a two-year vesting period, therefore, the compensation
cost is recognized on a straight-line basis over the vesting period. Performance shares would be available at the end of a four-year period from the date of grant.
However, as the shares granted are ordinary shares of the same class as existing shares composing the share capital of the company, employee shareholders are
entitled to dividends and voting rights attached to these shares at the end of the two-year vesting period. The compensation cost corresponds to the value of the
equity instruments received by the beneficiary, and is equal to the difference between the fair value of the shares to be received less the discounted value of
dividends that were not received over the vesting period.
The number of performance shares granted on April 15, 2010 was 1,084,172, compared to 567,001 shares granted on April 16, 2009. After taking into account a
discount for non-transferability of 17.50% of the share price on April 15, 2010 (17.58% on April 16, 2009), the fair value of each granted performance share was €13.80,
compared to €13.23 per share on April 16, 2009.
As the performance conditions fixed in 2009 were satisfied at the end of 2010, the number of performance shares granted in 2009 (indicated above) was definitive.
230
Cash-settled instruments
Beginning in 2006, following the delisting of Vivendi’s shares from the NYSE, until the end of 2007, following the relaxing of certain US securities regulations with
respect to foreign private issuers (“SEC Rule 701”), Vivendi granted specific instruments to its US resident managers and employees, with economic characteristics
similar to those granted to non-US resident managers and employees, and these equity instruments are settled in cash only. The value of the cash-settled instruments
granted is initially estimated as of the grant date and is then re-estimated at each reporting date until the payment date and the expense is adjusted pro rata taking
into account the vested rights at each such reporting date.
Stock appreciation right plans
When the instruments entitle the beneficiaries thereof to receive the appreciation in the value of Vivendi shares, they are known as “stock appreciation rights” (SAR),
which are the economic equivalent of stock options. Under a SAR plan, the beneficiaries will receive a cash payment upon exercise of their rights based on the Vivendi
share price equal to the difference between the Vivendi share price upon exercise of the SAR and their strike price as set at the grant date. SAR expire at the end of
a ten-year period.
Restricted stock unit plans
When the instruments entitle the beneficiaries thereof to receive the value of Vivendi shares, they are known as “restricted stock units” (RSU), which are the economic
equivalent of performance shares or restricted stocks. Under a RSU plan, the beneficiaries will receive, in general, at the end of a four-year period following the grant
date, a cash payment based on the Vivendi share price equal to the Vivendi share price at this date, plus the value of dividends paid on Vivendi shares in respect of the
two fiscal periods subsequent to the two-year vesting period, and converted into the local currency at the prevailing exchange rate. These RSU are simply units of
account and do not have any value outside this plan. They do not carry voting rights and do not represent an ownership interest in Vivendi or any of
its businesses.
The following table presents the value of outstanding stock appreciation right and restricted stock unit plans, measured as of December 31, 2010:
SAR
2007 (a)
Grant date
Data at grant date:
Strike price (in US dollars)
Number of instruments granted
Data at the valuation date (December 31, 2010) :
Expected term (in years)
Share price (in US dollars)
Expected volatility
Risk-free interest rate
Fair value of the granted option as of December 31, 2010 (in US dollars)
RSU
2006 (b)
2007 (c)
April 23,
September 22,
April 13,
April 23,
41.34
1,280,660
34.58
24,000
34.58
1,250,320
na
106,778
3.1
27.25
27%
1.25%
6.87%
0.71
2.8
27.25
27%
1.17%
6.87%
1.28
2.6
27.25
27%
1.10%
6.87%
1.22
27.25
na
na
6.87%
27.25
na: not applicable.
(a) SAR granted in 2007 vest at the end of a three-year vesting period. Therefore, the compensation cost was recognized on a straight-line basis over the
vesting period.
(b) SAR granted in 2006 vested annually in one-third tranches from the grant date’s anniversary. The compensation cost was recorded over the vesting
period, but not on a straight-line basis, given the vesting conditions. The expense was accounted for using the degressive method over a three-year
period.
(c) The RSU granted were conditional upon the achievement of certain operating objectives linked to the financial results of the group (adjusted net income
and cash flow from operations) as set forth in the budget for the current fiscal year. The operating performance objectives were met in 2007; therefore, all
RSU granted in 2007 were definitively vested by the beneficiaries in 2009. The compensation cost was therefore recognized on a straight-line basis over
the vesting period.
In accordance with the description above, the beneficiaries of RSU plans granted in 2006 received in 2010 a cash payment based on the Vivendi share price for a total
amount of €4 million.
231
Employee stock purchase and leveraged plans
Vivendi also maintains share purchase plans (stock purchase and leveraged plans) that allow substantially all of its full-time employees and retirees to purchase
Vivendi shares through capital increases reserved to them. These shares, which are subject to certain sale or transfer restrictions, may be purchased by employees
with a maximum discount of 20% on the average opening market price for Vivendi shares during the 20 trading days preceding the date of approval of the share
capital increase by the Management Board (purchase date). The difference between the subscription price of the shares and the share price on the date of grant
(corresponding to the subscription period closing date) represents the benefit granted to the beneficiaries. Furthermore, Vivendi applies a discount for nontransferability in respect of the restrictions on the sale or transfer of the shares during a five-year period, which is deducted from the benefit granted to the
employees. The value of the subscription plans granted is estimated and fixed at grant date. This expense is recognized with a corresponding increase in equity and
allocated to each business segment, pro rata the number of shares subscribed.
For the subscribed plans in 2010 and 2009, the applied assumptions were as follows:
Grant date
Subscription price (in euros)
Data at grant date:
Share price (in euros)
Discount to face value
5-year interest rate
Repo rate
2010
2009
July 5,
13.78
July 6,
14.61
16.46
16.28%
8.50%
1.78%
6.20%
0.36%
16.77
12.88%
8.35%
2.50%
6.90%
0.36%
Under the employee stock purchase plans, the number of subscribed shares was 1,576,839 in 2010 (1,184,491 shares subscribed in 2009). After taking into
account a discount for non-transferability of 11.3% of the share price on July 5, 2010 (12.0% on July 6, 2009), the fair value per subscribed share was €0.8 on
July 5, 2010, compared to €0.2 per subscribed share on July 6, 2009.
Under the leveraged plans implemented in 2010 and 2009, virtually all employees and retirees of Vivendi and its French and foreign subsidiaries are entitled to
subscribe for Vivendi shares through a reserved share capital increase, while obtaining a discounted subscription price, and to ultimately receive the capital gain
(calculated pursuant to the terms and conditions of the plan) corresponding to 10 shares for one subscribed share. A financial institution mandated by Vivendi hedges
this transaction.
In 2010, the number of subscribed shares under the leveraged plans was 5,413,389 (compared to 3,473,597 subscribed shares in 2009). After taking into account
the discount for non-transferability (specified above) and following the leveraged impact, the fair value per subscribed share on July 5, 2010 was €2.5, compared to
€2.0 per subscribed share on July 6, 2009.
Given the amount of subscriptions made through the traditional employee share purchase plans and the leveraged plans, the share capital (including issue premium)
increased by €98 million on July 29, 2010 and €71 million on July 30, 2009.
232
21.2.2. Information on outstanding Vivendi plans
Activity under all equity-settled and cash-settled Vivendi plans since January 1, 2009 is summarized below:
Equity-settled instruments
Stock options
Performance shares
Number of stock options
outstanding
Weighted average strike
price of stock options
outstanding (in euros)
Number of performance
shares outstanding
43,284,077
6,601,120
(155,828)
(7,498,324)
(564,340)
41,666,705
5,348,200
(a) (906,840)
(326,871)
(359,773)
3,500,498
48,921,919
30,204,309
30,724,124
28.2
20.0
13.4
47.6
26.9
23.5
19.7
14.6
47.8
22.4
21.3
21.4
22.3
22.2
986,827
570,337
(459,825)
(35,828)
1,061,511
1,101,173
(430,335)
(29,976)
124,266
1,826,639
112,978
Balance as of December 31, 2008
Granted
Exercised
Forfeited
Cancelled
Granted
Exercised
Forfeited
Cancelled
Adjusted
Exercisable as of December 31, 2010
Acquired as of December 31, 2010
(a) The weighted average share price for Vivendi shares at the dates of exercise for the options was €19.96 (compared to €19.36 for stock options exercised
in 2009).
As of December 31, 2010, the total intrinsic value of outstanding stock options was €60 million and their weighted average remaining contractual life amounted to
5.9 years (see below).
As of December 31, 2010, the weighted-average remaining period before issuing shares under performance shares was 1.2 year.
Please refer to Note 18 for the potential impact on share capital of the exercise of the outstanding stock options and the issuance of performance shares being
acquired.
Information on stock option plans as of December 31, 2010 is as follows:
Range of strike prices
Under €17
€17-€19
€19-€21
€21-€23
€23-€25
€25-€27
€27-€29
€29 and more
Number outstanding
Weighted average
strike price
(in euros)
Weighted average
remaining
contractual life
(in years)
Number vested
Weighted average
strike price
(in euros)
3,847,449
12,563,715
7,800,641
7,168,839
6,305,406
5,541,444
5,694,425
48,921,919
13.4
18.5
19.2
22.0
23.4
26.5
28.6
21.4
2.4
8.7
3.5
4.3
7.3
5.3
6.3
5.9
3,847,449
397,145
7,711,622
7,168,839
363,200
5,541,444
5,694,425
30,724,124
13.4
18.3
19.2
22.0
23.4
26.5
28.6
22.2
233
Cash-settled instruments
SAR (including former ADS converted into
SAR in May 2006)
Exercised
Forfeited
Cancelled
Exercised
Forfeited
Cancelled
Adjusted
RSU
Number of SAR
outstanding
Weighted average
strike price of SAR
outstanding
(in US dollars)
Number of restricted
stock units
outstanding
20,379,337
(107,312)
(8,165,843)
(27,212)
12,078,970
(a) (212 527)
(7,164,959)
(19,051)
419,247
5,101,680
5,101,680
5,101,680
51.8
22.0
51.5
53.7
52.3
12.7
66.3
24.9
33.0
30.2
30.2
30.2
302,732
(8,500)
(11,657)
282,575
(177,062)
(6,045)
99,468
99,468
(a) The weighted average share price for Vivendi shares at the dates of exercise of the SAR was $26.27 (compared to $29.65 for the SAR exercised in 2009).
As of December 31, 2010, all rights related to SAR were vested and their total intrinsic value amounted to $7 million.
Information concerning stock appreciation rights as of December 31, 2010 is as follows:
Under $21
$21-$24
$24-$27
$27-$30
$30-$33
$33-$36
$36-$39
$39 and more
Number of SAR
outstanding
Weighted average
strike price
(in US dollars)
Weighted average
remaining
contractual life
(in years)
Number vested
Weighted average
strike price
(in US dollars)
211,809
875,279
122,790
1,409,623
1,203,564
1,278,615
5,101,680
15.5
22.3
25.2
28.5
32.2
38.5
30.2
2.1
3.2
1.1
4.3
5.3
6.3
4.7
211,809
875,279
122,790
1,409,623
1,203,564
1,278,615
5,101,680
15.5
22.3
25.2
28.5
32.2
38.5
30.2
21.3. Plans granted by Activision Blizzard
21.3.1. Information on plans granted by Activision Blizzard
As part of the creation of Activision Blizzard as of July 10, 2008, Vivendi assumed the outstanding plans of Activision.
The accounting methods applied by Activision Blizzard to value these granted plans are described in Note 1.3.10. More precisely, the volatility applied in valuing the
plans granted by Activision Blizzard consists of the historical volatility of Activision Blizzard shares and the implied volatility based on traded put and call options. For
the plans granted in 2010, the expected stock price volatility ranged from 32.87% to 53.71% (compared to from 41.56% to 60.77% in 2009). The risk-free interest rate
used was a forward rate and the expected dividend yield assumption for options granted in 2010 was based on the company’s historical and expected future amount
of dividend payouts (the dividend yield was zero in 2009).
234
Equity incentive plans
On July 28, 2008, the Board of Directors of Activision Blizzard adopted the Activision Blizzard Inc. 2008 Incentive Plan, approved by stockholders and amended and
restated by the Board of Directors on September 24, 2008, further amended and restated by the Board of Directors with stockholders approval on June 3, 2009 and
further amended and restated by the Compensation Committee of the Board of Directors with stockholders approval on December 17, 2009, as well as further
amended and restated by the Board of Directors and the Compensation Committee of this Board with stockholders approval on June 3, 2010 (as so amended and
restated, the “2008 Plan”). The 2008 Plan authorizes the Compensation Committee of the Board of Directors of Activision Blizzard to provide stock-based
compensation in the form of stock options, share appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other
performance or value-based awards structured by the Compensation Committee within parameters set forth in the 2008 Plan, including custom awards that are
denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of the common stock of Activision Blizzard, or factors
that may influence the value of the common stock of Activision Blizzard or that are valued based on its performance or the performance of any of the subsidiaries or
business units of Activision Blizzard or other factors designated by the Compensation Committee, as well as non incentive bonuses, for the purpose of providing
incentives and rewards for performance to the directors, officers, employees of, and consultants to, Activision Blizzard and its subsidiaries.
While the Compensation Committee has broad discretion to create equity incentives, the stock-based compensation program of Activision Blizzard for the most part
currently utilizes a combination of options and restricted stock units. Options have time-based vesting schedules, generally vesting annually over a period of three to
five years and all options expire ten years from the grant date. Restricted stock units either have time-based vesting schedules, generally vesting in their entirety on an
anniversary of the date of grant or vesting annually over a period of three to five years, or vest only if certain performance measures are met. Under the terms of the
2008 Plan, the exercise price for the options, must be equal to or greater than the closing price per share of the common stock of Activision Blizzard on the date the
award is granted, as reported on NASDAQ.
Upon the effective date of the 2008 Plan, Activision Blizzard ceased to make awards under all prior equity incentive plans (collectively, the “Prior Plans”), although
such plans will remain in effect and continue to govern outstanding awards.
Pursuant to the 2008 Plan as adopted, 30 million shares of the common stock of Activision Blizzard were made available for issuance. The 2008 Plan was amended
with stockholder approval on December 17, 2009 to increase the number of shares of the common stock of Activision Blizzard available for issuance thereunder by
14 million and was further amended with stockholders approval on June 3, 2010 to increase the number of shares of the common stock of Activision Blizzard available
for issuance thereunder by 56 million. The number of shares of the common stock of Activision Blizzard reserved for issuance under the 2008 Plan may be further
increased from time to time by: (i) the number of shares relating to awards outstanding under any Prior Plan that: (a) expire, or are forfeited, terminated or cancelled,
without the issuance of shares; (b) are settled in cash in lieu of shares; or (c) are exchanged, prior to the issuance of shares of the common stock of Activision Blizzard,
for awards not involving its common stock; and (ii) if the exercise price of any option outstanding under any Prior Plan is, or the tax withholding requirements with
respect to any award outstanding under any Prior Plan are, satisfied by withholding shares otherwise then deliverable in respect of the award or the actual or
constructive transfer to the Company of shares already owned, the number of shares equal to the withheld or transferred shares. As of December 31, 2010, Activision
Blizzard had approximately 60 million shares (approximately 16 million shares as of December 31, 2009) of its common stock reserved for future issuance under the
2008 Plan.
The characteristics of the stock option plans granted by Activision Blizzard are presented below:
Stock option plans
2010
Weighted-average data at grant date: (a)
Options strike price (in US dollars)
Maturity (in years)
Expected term (in years)
Expected volatility
Weighted-average fair value of the option at grant date (in US dollars) (a)
Weighted-average fair value of the plan at grant date (in millions of US dollars) (a)
na: not applicable.
(a) Relates to the weighted-average by number of instruments for each attribution in each fiscal year.
11.52
10
5.79
11,275,785
11.52
46%
2.97%
1.33%
na
3.98
45
2009
11.67
10
5.95
9,512,080
11.67
53%
3.63%
na
5.40
51
235
Restricted stock units and restricted stock awards
Activision Blizzard grants restricted stock units and restricted stock awards (collectively referred to as “restricted stock rights”) under the 2008 Plan to employees
around the world and Activision Blizzard has assumed, as a result of the creation of Activision Blizzard, the restricted stock rights granted by Activision. Restricted
stock rights entitle the holders thereof to receive shares of the common stock of Activision Blizzard at the end of a specified period of time or otherwise upon a
specified occurrence (which may include the satisfaction of a performance measure). Restricted stock awards are issued and outstanding upon grant. Holders of
restricted stock rights are restricted from selling the shares until they vest. Upon vesting of restricted stock rights, Activision Blizzard may withhold shares otherwise
deliverable to satisfy tax withholding requirements. Restricted stock rights are subject to forfeiture and transfer restrictions. Vesting is contingent upon the holders’
continued employment with Activision Blizzard and may be subject to other conditions (which may include the satisfaction of a performance measure). If the vesting
conditions are not met, unvested restricted stock rights will be forfeited.
In connection with the creation of Activision Blizzard, on July 9, 2008, the Chief Executive Officer of Activision Blizzard received a grant of 2,500,000 market
performance-based vesting restricted shares, which vest in 20% increments on each of the first, second, third, and fourth anniversaries of the date of grant, with
another 20% vesting on December 31, 2012, the expiration date of the Chief Executive Officer’s employment agreement with Activision Blizzard, in each case subject
to Activision Blizzard attaining the specified compound annual total stockholder return target for that vesting period. If Activision Blizzard does not achieve the market
performance measure for a vesting period, no performance shares will vest for that vesting period. If, however, Activision Blizzard achieves a market performance
measure for a subsequent vesting period, then all of the performance shares that would have vested on the previous vesting date will vest on the vesting date when
the market performance measure is achieved.
The characteristics of the restricted stock units and restricted stocks granted by Activision Blizzard are presented below:
Restricted stock plans
2010
Weighted-average data at grant date: (a)
Vesting period (in years)
Weighted-average fair value of the instrument at grant date ((in US dollars) (a)
Weighted-average fair value of the plan at grant date (in millions of US dollars) (a)
3
10,364,522
11.52
1.33%
na
11.54
120
2009
3
2,754,974
11.80
na
11.80
33
na: not applicable
(a) Relates to the weighted-average by number of instruments for each attribution in each fiscal year.
Non-plan employee stock options granted to the Chief Executive Officer and the Co-Chairman of Activision
In connection with prior employment agreements, the Chief Executive Officer and the Co-Chairman of Activision Blizzard were previously granted options to purchase
the common stock of Activision. The Board of Directors of Activision, Inc. approved the granting of these options. As of December 31, 2008, non-plan options to
purchase approximately 16 million shares under such grants were outstanding with a weighted average exercise price of $1.02, all of which were exercised
during 2009.
236
21.3.2. Information on outstanding Activision Blizzard plans
Stock options
Granted
Exercised
Forfeited/Expired
Granted
Exercised
Forfeited/Expired
Restricted stocks
Number of stock
options outstanding
Weighted average
strike price of stock
options outstanding
(in US dollars)
Number of restricted
stocks outstanding
97,841,005
9,512,080
(34,303,889)
(1,230,875)
71,818,321
11,275,785
(a) (16,210,550)
(5,708,760)
61,174,796
36,650,295
36,650,295
6.5
11.7
2.6
10.0
9.0
11.5
5.0
10.2
10.5
9.3
9.3
10,267,104
2,754,974
(1,539,390)
(179,963)
11,302,725
10,364,522
(2,556,635)
(2,538,184)
16,572,428
-
(a) The weighted average share price for the shares of Activision Blizzard on the date the options were exercised was $11.40 (compared to $11.69 in 2009).
As of December 31, 2010, the total intrinsic value of outstanding stock options was $157 million and their weighted average remaining contractual life was 7.0 years
(see below).
As of December 31, 2010, under restricted stocks, the weighted average remaining period before issuing shares was 2.0 years.
Please refer to Note 18 for the potential impact on share capital of the exercise of the outstanding stock options and the issuance of performance shares being
acquired.
Information concerning stock option plans as of December 31, 2010 is as follows:
Under $2
$2-$4
$4-$6
$6-$8
$8-$10
$10-$12
$12-$14
$14-$16
$16-$17
$17 and more
Number outstanding
334,690
3,564,572
3,578,430
7,853,778
8,773,010
22,106,142
5,830,440
3,540,000
5,533,734
60,000
61,174,796
Weighted average
Weighted average
strike price remaining contractual
life (in years)
(in US dollars)
1.8
3.3
5.5
7.0
9.3
11.3
13.1
15.0
16.5
18.4
10.5
2.0
2.1
4.0
5.0
6.5
8.8
7.4
7.5
7.6
7.6
7.0
Number vested
Weighted average
strike price
(in US dollars)
334,690
3,564,572
3,522,530
7,386,848
8,045,284
5,878,097
2,845,297
1,711,000
3,301,977
60,000
36,650,295
1.8
3.3
5.5
7.0
9.3
10.9
13.2
15.0
16.5
18.4
9.3
21.3.3. Blizzard (Activision Blizzard subsidiary) long-term incentive plan
In 2006, Blizzard implemented the Blizzard Equity Plan (BEP), an equity incentive plan denominated in US dollars. Under the Blizzard Equity Plan, certain key executives
and employees of Blizzard were awarded restricted shares of Blizzard stock and other cash settled awards of Blizzard.
On July 9, 2008, the creation of Activision Blizzard was deemed a change in control, which automatically triggered cash payments to the beneficiaries for the portion
of awards that were vested for $106 million (€68 million). In addition, on that date, the outstanding unvested rights were immediately vested, cancelled and
extinguished and were converted into a new right to receive $88 million in cash on January 9, 2010, assuming participants remain employed through the payment
date. The compensation cost was therefore recognized on a straight-line basis over an 18 month period from July 9, 2008 to January 9, 2010.
As a result, as of December 31, 2009, a provision of $86 million (€60 million) was recognized. In January 2010, $88 million (€61 million) was paid out as the final
distribution under the Plan, and there are no payment obligations remaining under this Plan.
237
21.4. UMG long-term incentive plan
Effective January 1, 2010, UMG implemented long-term incentive arrangements under which certain key executives of UMG are awarded phantom equity units and
phantom stock appreciation rights whose value is intended to reflect the value of UMG. These units are simply units of account and do not represent actual ownership
interest in either UMG or Vivendi. The equity units are notional grants of equity that will be payable in cash upon settlement no later than 2015 or earlier under certain
circumstances. The stock appreciation rights are essentially options on those notional shares that provide additional compensation tied to any increase in value of
UMG over the term. The SAR’s are also settled in cash only no later than 2015 or earlier under certain circumstances. There is a guaranteed minimum payout of
$25 million.
Payouts under the plan generally coincide with terms of employment, but can be accelerated or reduced under certain circumstances. The values for both payouts are
based upon third party valuations. While the participants’ rights vest at the end of a fixed vesting period, compensation expense is recognized over the vesting period
as services are rendered. At each closing date, the expense is recognized based on the portion of the vesting period that has elapsed and the fair value of the units
calculated using an appropriate grant date model in accordance with IFRS 2.
As of December 31, 2010, the amount accrued under these arrangements was €7 million (nil as of December 31, 2009). There have been no payments made to date.
21.5. Neuf Cegetel restricted stock plans
Following Neuf Cegetel’s consolidation by SFR in April 2008, Vivendi assumed the residual plans of Neuf Cegetel, including restricted shares granted between 2005
and 2007 to the Company’s employees and/or corporate officers. The acquisition of shares only became final after the expiration of a two-year vesting period, with
a minimum holding period of two years. As of December 31, 2009, all restricted shares granted under these plans were definitely vested.
Finally, the shares owned (but currently in a holding period) by executives and employees of Ex-Neuf Cegetel are subject to reciprocal put and call option agreements
with SFR, with a 2011 maturity at the latest. As of December 31, 2010, the amount accrued was €38 million (compared to €66 million as of December 31, 2009),
primarily due to the €31 million payment to beneficiaries of the Neuf Cegetel restricted stock plans in 2010 (compared to €131 million paid in 2009).
238
Note 22. Borrowings and other financial liabilities
22.1. Analysis of long-term borrowings and other financial liabilities
Bonds
€750 million bond issue (March 2010) (a)
€700 million bond issue (December 2009) (a)
€500 million bond issue (December 2009) (a)
€1.1 billion bond issue (January 2009) (a)
€700 million bond issue (October 2006) (a)
€600 million bond issue (February 2005) (a)
$700 million bond issue (April 2008)
$700 million bond issue (April 2008)
€700 million bond issue (October 2006) (a)
Subtotal: Vivendi SA’s bonds
€1.0 billion bond issue (July 2005) (a)
€300 million bond issue (July 2009) (a)
Subtotal: SFR’s bonds
Facilities
€2.0 billion revolving facility
Subtotal: Vivendi SA’s facilities
€450 million revolving facility
Securitization programs
Securitization programs
Subtotal: SFR’s facilities
GVT – BNDES notes
Maroc Telecom – MAD 3 billion notes
Other
Nominal value of borrowings
Cumulative effect of amortized cost and reevaluation due
to hedge accounting
Borrowings
Other derivative instruments
Nominal interest
rate (%)
Effective
interest
rate (%)
4.00%
4.88%
4.25%
7.75%
4.50%
3.88%
6.63%
5.75%
Euribor 3 months +0.50%
4.15%
4.95%
4.39%
7.69%
5.47%
3.94%
6.85%
6.06%
-
March 2017
December 2019
December 2016
January 2014
October 2013
February 2012
April 2018
April 2013
October 2011
3.375%
5.00%
4.14%
5.05%
July 2012
July 2014
Euribor +0.250%
Euribor +0.250%
-
April 2012
August 2013
Euribor +0.175%
Euribor +0.160%
Euribor +0.750%
Euribor +0.800%
-
April 2011
November 2012
March 2011
January 2015
5.05%
-
-
2017
July 2014
na
-
-
-
Maturity December 31, 2010
December 31, 2009
750
700
500
(b) 894
700
600
(c) 529
(c) 529
(d) 5,202
1,000
300
1,300
700
500
1,120
700
600
487
487
700
5,294
1,000
300
1,300
750
750
(e) 430
(d) 310
740
(f) 163
148
214
8,517
450
450
185
290
280
755
199
215
8,213
(6)
8,511
1
61
8,573
(68)
8,145
13
197
8,355
na: not applicable
(a) The bonds, listed on the Luxembourg Stock Exchange, are subject to customary pari-passu, negative pledge and event of default provisions.
(b) In December 2010, Vivendi SA acquired €226 million of bonds from the borrowing of €1.1 billion issued in January 2009 (€259 million, including premium).
(c) As of December 31, 2010, the nominal value of these dollar denominated bonds issued in April 2008 was calculated based on the exchange rate on the
closing date, i.e., 1.32 euro/US dollar (compared to 1.44 euro/US dollar as of December 31, 2009).
(d) These line items were reclassified in short-term borrowings and other financial liabilities.
(e) In June 2010, SFR refinanced the current credit facility of €1.2 billion with an initial scheduled maturity of April 2011. The new credit facility of the same
amount, maturing in June 2015, was undrawn as of December 31, 2010.
(f) Relates to GVT’s loan with BNDES and the average rate paid was 11.1% as of December 31, 2010. This loan is subject to compliance with certain financial
covenants (please refer to Note 22.6 below).
239
22.2. Analysis of short-term borrowings and other financial liabilities
Bonds
Vivendi SA – €630 million bond issue (April 2005)
Vivendi SA – €700 million bond issue (October 2006)
GVT – $200 million bond issue
Subtotal: bonds
Facilities
SFR – Securitization programs
SFR – Syndicated facility ("Club Deal") tranche A
SFR – Structured financing (UK Lease)
GVT – BNDES notes
Subtotal: facilities
Commercial paper (d)
Vivendi SA
SFR
Subtotal: commercial paper
Bank overdrafts
Other
Cumulative effect of amortized cost and reevaluation due to hedge accounting
Borrowings
Commitments by Vivendi to purchase outstanding GVT shares
Put option granted to M6 on 5.1% of the share capital of Canal+ France
Put options granted to various third parties by Canal+ Group and SFR
Nominal interest
rate (%)
Maturity
December 31, 2010
December 31, 2009
3.63%
Euribor 3 months +0.50%
-
April 2010
October 2011
-
700
(a) 700
630
137
767
Euribor +0.750%
Euribor +0.400%
Euribor +0.400%
-
March 2011
July 2010
November 2010
-
283
(b) (c) 23
306
248
100
199
547
Eonia +0.22%
Eonia +0.09%
January 2011
January 2011
-
-
-
-
843
854
1,697
276
412
3,391
3,391
(e) 2
(f) 3
5
34
3,430
635
933
1,568
307
739
3,928
(6)
3,922
571
384
2
957
28
4,907
February 2010
-
(a) Relates to the bond issued by GVT in June 2006, denominated in US dollar, at a 12% nominal interest rate with an initial scheduled maturity of
September 2011; the bond was early redeemed in full in January and February 2010 thanks to GVT’s cash and cash equivalents.
(b) In April 2010, SFR early redeemed the syndicated facility (“Club Deal”) tranche A for €248 million, which had been due to expire in July 2010.
(c) Please refer to Note 22.1, footnote (f) above.
(d) In 2010, Vivendi SA increased its commercial paper program from €1 to €3 billion. As of December 31, 2010, SFR has a commercial paper program for
€1.2 billion.
(e) The acquisition of 100% of GVT was completed during 2010. Please refer to Note 2.1.
(f) As part of the combination of the Canal+ Group and TPS pay-TV activities in France finalized in January 2007, M6 was granted a put option by Vivendi
on its 5.1% interest in the share capital of Canal+ France. The present value of this option amounted to €384 million as of December 31, 2009.
On February 22, 2010, M6 exercised its put option and thus exited from the share capital of Canal+ France. Please refer to Note 26.3.
240
22.3. Nominal value of borrowings by nature of interest rate and by currency
Breakdown by interest rate
Note
Long-term nominal value of borrowings
Short-term nominal value of borrowings
Fixed interest rate
Floating interest rate
Nominal value of borrowings before hedging
Pay-fixed interest rate swaps
Pay-floating interest rate swaps
Net position at fixed interest rate
Fixed interest rate
Floating interest rate
Nominal value of borrowings after hedging
22.1
22.2
23.2
December 31, 2010
8,517
3,391
11,908
7,016
4,892
11,908
2,335
(3,107)
(772)
6,244
5,664
11,908
December 31, 2009
59%
41%
100%
52%
48%
100%
8,213
3,928
12,141
7,122
5,019
12,141
3,885
(2,273)
1,612
8,734
3,407
12,141
59%
41%
100%
72%
28%
100%
As of December 31, 2010, the average cost of borrowings (after management) was 4.09%, with a fixed rate ratio of 61% (compared to 4.75%, with a fixed rate ratio of
92% in 2009).
Breakdown by currency
December 31, 2010
Euro – EUR
US dollar – USD
Dirham – MAD
Other
10,253
(a) 1,069
245
341
11,908
December 31, 2009
86%
9%
2%
3%
100%
10,384
(a) 1,112
295
350
12,141
86%
9%
2%
3%
100%
(a) Mainly comprises two dollar denominated bonds for $1,400 million issued in April 2008, representing €1,058 million as of December 2010 (€974 million as
of December 2009). Foreign currency risk related to these bonds is hedged at 100% by a long-term loan granted by Vivendi SA to an American subsidiary.
241
22.4. Available bank credit facilities of Vivendi SA and SFR
December 31, 2010
Vivendi SA
€2.0 billion revolving facility (April 2005)
€2.0 billion revolving facility (August 2006)
of which initial credit line
extended credit line
€2.0 billion revolving facility (February 2008)
of which tranche 1 (a)
tranche 2
€1.0 billion revolving facility (September 2010) (a)
Subtotal
Commercial paper issued (b)
Total of Vivendi SA’s available credit bank facilities,
net of commercial paper
SFR
€1.2 billion revolving facility (July 2004) (c)
€1.2 billion revolving facility (June 2010) (c)
€450 million revolving facility (November 2005)
€850 million revolving facility (May 2008)
€100 million revolving facility (November 2008)
Syndicated loan "Club Deal" (July 2005)
of which tranche A
tranche B
Securitization program (March 2006)
Securitization program (January 2010)
Structured financing (UK Lease)
Subtotal
Commercial paper issued (b)
Total of SFR’s available credit bank facilities, net of
commercial paper
Total Vivendi SA and SFR
December 31, 2009
Maturity
Maximum
amount
Drawn
amount
Available
amount
Maximum
amount
Drawn
amount
Available
amount
April 2012
2,000
-
2,000
2,000
450
1,550
August 2012
August 2013
271
1,729
750
271
979
271
1,729
-
271
1,729
February 2013
September 2015
1,000
1,000
6,000
750
1,000
1,000
5,250
(851)
1,000
1,000
6,000
450
1,000
1,000
5,550
(643)
4,399
4,907
June 2015
November 2012
May 2013
February 2011
1,200
450
850
100
430
-
1,200
20
850
100
1,200
450
850
100
185
290
-
1,015
160
850
100
July 2010
March 2012
March 2011
January 2015
November 2010
492
300
310
3,702
283
310
1,023
492
17
2,679
(854)
248
492
280
100
3,720
248
280
100
1,103
492
2,617
(933)
9,702
1,825
6,224
9,720
1,684
6,591
(a) In September 2010, Vivendi SA early refinanced a €1 billion credit facility with an initial scheduled maturity of February 2011 by a bank facility of the same
amount with a five-year term.
(b) Short-term commercial papers are backed by confirmed credit lines which are no longer available for these amounts.
(c) In June 2010, SFR refinanced the €1.2 billion credit facility with an initial scheduled maturity of April 2011 by a bank facility of the same amount with a
five-year term.
Credit facilities available as of February 22, 2011
As of February 22, 2011, the date of Vivendi’s Management Board meeting that approved the Financial Statements for the year ended December 31, 2010, Vivendi SA
had committed bank facilities in the amount of €6 billion, fully available. Considering the amount of commercial paper issued at this date, and backed on credit
facilities for €0.3 billion, these lines were available in an aggregate amount of €5.7 billion. SFR had available committed bank facilities in the amount of €3.4 billion,
drawn for €1 billion. Considering the amount of commercial paper issued at this date and backed on credit facilities for €0.9 billion, these lines were available for an
aggregate amount of €1.5 billion.
242
22.5. Future minimum contractual payments related to borrowings and other financial liabilities
The table below presents the net carrying values of borrowings and other financial liabilities as presented in the Statement of Financial Position (“carrying value”) and
contractual undiscounted cash flows as set forth in the relevant agreements (“nominal value”):
Nominal value of borrowings (a)
Cumulative effect of amortized cost and reevaluation due to
hedge accounting
Interest to be paid (b)
Borrowings
hedge accounting
Borrowings
hedge accounting
Borrowings
hedge accounting
Borrowings
December 31, 2010
Nominal value
2012
2013
Carrying
value
Total
2011
2014
2015
After 2015
8,517
8,517
-
2,165
2,107
1,321
366
2,558
(6)
8,511
1
61
8,511
3,391
1,663
10,180
1
70
10,251
3,391
368
368
36
404
3,391
362
2,527
32
2,559
278
2,385
2
2,387
220
1,541
1,541
127
493
493
308
2,866
1
2,867
3,391
5
34
3,430
12,003
14
3,405
5
32
3,442
13,693
14
3,405
5
32
3,442
3,846
2,559
2,387
1,541
493
2,867
December 31, 2009
Nominal value
2011
2012
Carrying
value
Total
2010
2013
2014
After 2014
8,213
8,213
-
1,273
2,437
1,262
1,481
1,760
(68)
8,145
13
197
8,355
3,928
1,728
9,941
13
225
10,179
3,928
333
333
78
411
3,928
327
1,600
13
67
1,680
314
2,751
38
2,789
238
1,500
17
1,517
190
1,671
15
1,686
326
2,086
10
2,096
(6)
3,922
957
28
4,907
13,262
40
3,968
957
29
4,954
5,365
40
3,968
957
29
4,954
5,365
1,680
2,789
1,517
1,686
2,096
(a) Contractual undiscounted cash flows related to nominal value of borrowings in currency were estimated based on the applicable exchange rate as of
December 31, 2010 and December 31, 2009, respectively.
(b) The interest to be paid on floating rate borrowings was estimated based on floating rates as of December 31, 2010 and December 31, 2009, respectively.
243
22.6. Description of main financial covenants
Vivendi SA
Vivendi SA is subject to certain financial covenants pursuant to which Vivendi SA is required to comply with various financial ratios, as described hereunder.
As of December 31, 2010, Vivendi was in compliance with its financial ratios.
Loans
The syndicated facilities (please refer to the table included in Note 22.4 above) contain customary provisions related to events of default and covenants relating to
negative pledge, divestiture and merger transactions. In addition, at the end of each half year, Vivendi SA is required to comply with a ratio of Proportionate Financial
Net Debt1 to Proportionate EBITDA2 over a twelve-month rolling period not exceeding three for the duration of the loans. Non-compliance with this ratio could result
in the early repayment of the facilities if they were drawn, or their cancellation.
The renewal of credit lines when they are drawn is contingent upon the issuer reiterating certain representations regarding its ability to comply with its obligations
with respect to the contracts of the loans.
Bonds
Bonds issued by Vivendi SA (totalling €5.9 billion as of December 31, 2010) contain customary provisions related to default, negative pledge and rights of payment
(pari-passu ranking). In addition, bonds issued since 2006 by Vivendi SA for a total amount of €5.3 billion contain a change in control trigger if the long-term rating
of Vivendi SA is downgraded below investment grade status (Baa3/BBB-) as a result of such an event.
SFR
SFR is subject to certain financial covenants pursuant to which SFR is required to comply with various financial ratios, as described hereunder. As of December 31, 2010,
SFR was in compliance with its financial ratios.
Loans
SFR’s bank credit facilities (please refer to the table included in Note 22.4 above) contain customary default, negative pledge, and merger and divestiture covenants.
These facilities are subject to a change in control provision. In addition, at the end of each half year, SFR must comply with the two following financial ratios: (i) a ratio
of Financial Net Debt to consolidated EBITDA over a twelve-month rolling period not exceeding 3.5; and (ii) a ratio of consolidated earnings from operations
(consolidated EFO) to consolidated net financing costs (interest) equal to or greater than 3. Non-compliance with these financial ratios could constitute an event of
default that could among others result in the cancellation or the early repayment of the different loans.
The renewal of confirmed bank credit facilities when they are drawn and the launch of securitization programs are contingent upon the issuer reiterating certain
representations regarding its ability to comply with its financial obligations.
Bonds
Bonds issued by SFR (totalling €1.3 billion as of December 31, 2010) contain customary provisions related to default, negative pledge and rights of payment
(pari-passu ranking).
GVT
GVT is subject to certain financial covenants pursuant to which GVT is required to comply with various financial ratios, as described hereunder. As of
December 31, 2010, GVT was in compliance with its financial ratios.
The loan issued by GVT with BNDES (National Bank for Economic and Social Development) is subject to certain financial covenants pursuant to which GVT is required
to comply, at the end of each half year, with at least three of the following financial ratios: (i) a ratio of equity to total asset equal to or higher than 0.40; (ii) a ratio of
Financial Net Debt to consolidated EBITDA not exceeding 2.50; (iii) a ratio of current financial liabilities to EBITDA not exceeding 0.45; and (iv) a ratio of EBITDA to net
financial expenses of at least 4.00.
This loan also contains a change in control trigger. On November 13, 2009, the takeover of GVT by Vivendi triggered the early repayment of this loan which was
consequently reclassified in short-term borrowings in the Statement of Financial Position as of December 31, 2009. Following the BNDES’s approval on February 9, 2010,
to waive the change-of-control trigger, this loan was reclassified as long-term borrowing. In addition, in July 2010, GVT made an early partial reimbursement of this
loan in the amount of BRL250 million (approximately €113 million). Please refer to Note 22.7.
1. Defined as Vivendi Financial Net Debt excluding cash management financial assets less the share of Financial Net Debt relating to loans issued before December 31, 2009, excluding cash management financial
assets relating to loans issued before December 31, 2009, attributable to non-controlling interests of Activision Blizzard, SFR and Maroc Telecom Group.
2. Defined as Vivendi modified EBITDA less modified EBITDA attributable to non-controlling interests of Activision Blizzard, SFR, and Maroc Telecom Group plus the dividends received from the entities that are
not consolidated.
244
22.7. Intercompany loans
December 31, 2010
(in millions of euros, except where noted)
Loan facility granted by Vivendi SA to SFR (a)
€3 billion revolving facility (April 2008)
of which tranche A
tranche B
tranche C
€1.5 billion revolving facility (June 2009)
Total
Loan facility granted by Vivendi to GVT (March 2010)
Loan facility granted by SPT to Maroc Telecom (June 2010) (b)
(in millions of MAD)
Loan facility granted by Vivendi SA to VTB (November 2009) (c)
Loan facility granted by Vivendi SA to Activision Blizzard (July 2008) (d)
(in millions of dollars)
December 31, 2009
Maximum
amount
Drawn
amount
Available
amount
Maximum
amount
Drawn
amount
Available
amount
Mar. 2015
1,000
1,500
2,500
540
1,000
1,450
2,450
156
50
50
384
1,000
1,000
1,500
3,500
-
1,000
1,000
650
2,650
-
850
850
-
Mar. 2011
Nov. 2010
1,150
-
1,150
-
-
4,000
-
4,000
Mar. 2011
-
-
-
475
-
475
Maturity
July 2009
July 2010
Dec. 2012
June 2013
(a) In addition to the items presented above, in January 2011, Vivendi SA and SFR set up a current account advance, in favor of SFR for an amount of up to
€1 billion for one year, renewable by tacit agreement.
(b) In June 2010, SPT “Société de Participations dans les Télécommunications”, a wholly-owned subsidiary of Vivendi, made its cash available to Maroc
Telecom for an initial amount of MAD 3,450 million (€313 million) pursuant to three short-term loan facility contracts of MAD 1,150 million each, maturing
on September 2, 2010, December 2, 2010 and March 2, 2011, respectively.
(c) VTB, a wholly-owned subsidiary of Vivendi, organized under Brazilian law, was initially created in 2009, in order to acquire 100% of the GVT shares. This
acquisition was intended to be financed with this facility. Since the acquisition of GVT was ultimately and primarily made by Vivendi SA directly and the
April 2010 tender offer was made by VTB, financed with a capital increase, this €4 billion revolving facility was no longer necessary and was therefore cancelled.
(d) On July 23, 2010, Activision Blizzard notified Vivendi SA regarding the cancellation of this loan facility granted in July 2008.
22.8. Average maturity
The average term of the instruments included in the consolidated financial debt of Vivendi and its subsidiaries is assessed using two methodologies:
• The average “accounting” term, pursuant to which a short-term draw-down on a medium-term credit line is only taken into account for the term of the
short-term draw-down.
• The average “economic” term, pursuant to which all undrawn amounts on available medium-term credit lines may be used to reimburse group borrowings
with the shortest term.
Vivendi
As of December 31, 2010, the average “accounting” term of the group’s financial debt was 2.8 years, compared to 2.9 years at year-end 2009, and the average
“economic” term of the group’s financial debt was 4.0 years, compared to 3.9 years at year-end 2009.
SFR
As of December 31, 2010, the average “economic” term 3 of SFR’s financial debt was 2.6 years (compared to 2.3 years at year-end 2009).
245
22.9. Vivendi and SFR credit ratings
As of February 22, 2011, the date of the Management Board meeting that approved the Financial Statements for the year ended December 31, 2010, the credit ratings
of Vivendi were as follows:
Rating agency
Standard & Poor’s
Moody’s
Fitch Ratings
Rating date
Type of debt
Ratings
July 27, 2005
Long-term corporate
Short-term corporate
Senior unsecured debt
Long-term senior unsecured debt
Long-term senior unsecured debt
BBB
A-2
BBB
Baa2
BBB
Rating date
Type of debt
Ratings
Outlook
June 8, 2009
June 8, 2009
Long-term debt
Short-term debt
BBB+
F2
Stable
Stable
September 13, 2005
December 10, 2004
Outlook
}
Stable
Stable
Stable
As of February 22, 2011, the credit ratings of SFR were as follows:
Rating agency
Fitch Ratings
22.10. Financial Net Debt of SFR and Maroc Telecom Group, and net cash position of Activision Blizzard
As of December 31, 2010:
• SFR’s Financial Net Debt amounted to €5,833 million (compared to €5,935 million as of December 31, 2009);
• Maroc Telecom Group’s Financial Net Debt amounted to €388 million (compared to €315 million as of December 31, 2009); and
• Activision Blizzard had a positive net cash position of €2,632 million (compared to €2,196 million as of December 31, 2009).
Note 23. Financial instruments and management of market risks
23.1. Fair value of financial instruments
Pursuant to IAS 32, financial instruments are defined as follows:
• financial assets, which comprise the following assets:
- cash;
- contractual rights to receive cash or another financial asset;
- contractual rights to exchange a financial instrument under potentially favorable conditions; or
- equity instruments of another entity.
In practice, financial assets include cash and cash equivalents, trade accounts receivable and other as well as financial assets measured at fair value, at historical cost
or at amortized cost.
• financial liabilities, which comprise the following liabilities:
- contractual obligations to deliver cash or another financial asset; or
- contractual obligations to exchange a financial instrument under potentially unfavorable conditions.
In practice, financial liabilities include trade accounts payable and other, other non-current liabilities, short and long-term financial borrowings and other financial
liabilities, including commitments to purchase non-controlling interests and other derivative financial instruments.
• equity instruments of the group.
246
Accounting categories and fair value of financial instruments
December 31, 2010
Breakdown by accounting category
Financial assets
Note
Assets
available for
sale
Fair value
through profit
or loss
Amortized cost
Derivative
instruments
Total carrying
value
Fair value
15
16
17
50
na
543
3,310
1
5
6
-
434
6,711
na
8,511
3,391
11,902
1,074
14,451
91
na
61
34
95
-
1,118
6,711
3,310
8,573
3,430
12,003
1,074
14,451
1,118
6,711
3,310
8,933
3,431
12,364
1,074
14,451
22
16
16
December 31, 2009
Breakdown by accounting category
Financial assets
Note
Assets
available for
sale
Fair value
through profit
or loss
Amortized cost
Derivative
instruments
Total carrying
value
Fair value
15
16
17
50
na
384
3,346
13
957
970
-
476
6,467
na
8,145
3,922
12,067
1,311
13,567
30
na
197
28
225
-
940
6,467
3,346
8,355
4,907
13,262
1,311
13,567
940
6,467
3,346
8,676
4,911
13,587
1,311
13,567
22
16
16
na: not applicable.
The carrying value of trade accounts receivable and other, cash and cash equivalents and trade accounts payable is a reasonable approximation of fair value, due to
the short maturity of these instruments.
Valuation method for financial instruments at fair value
The following tables present the fair value method of financial instruments according to the three following levels:
• Level 1: fair value measurement based on quoted prices in active markets for identical assets or liabilities;
• Level 2: fair value measurement based on observable market data (other than quoted prices included within Level 1); and
• Level 3: fair value measurement based on valuation techniques that use inputs for the asset or liability that are not based on observable market data.
As a reminder, the other financial instruments at amortized cost are not included in the following table.
of which cash management financial assets
available-for-sale securities
derivative financial instruments
other financial assets at fair value through profit or loss
Financial liabilities at fair value
of which commitments to purchase non-controlling interests
other financial derivative instruments
Note
Total
15
684
508
50
91
35
3,310
101
6
95
17
December 31, 2010
Fair value
Level 1
Level 2
526
508
1
17
3,310
-
91
91
97
2
95
Level 3
67
49
18
4
4
-
247
of which cash management financial assets
available-for-sale securities
derivative financial instruments
other financial assets at fair value through profit or loss
Financial liabilities at fair value
of which commitments to purchase non-controlling interests
other financial derivative instruments
Note
Total
15
464
271
50
30
113
3,346
1,195
970
225
17
December 31, 2009
Fair value
Level 1
Level 2
326
271
2
53
3,346
-
Level 3
31
1
30
1,195
970
225
107
47
60
-
In 2010 and 2009, there was no significant transfer of financial instruments measured at fair value between level 1 and level 2. In addition, as of December 31, 2010
and December 31, 2009, financial instruments measured at level 3 fair value did not include any significant amount.
23.2. Management of market risks and financial derivative instruments
Vivendi centrally manages its financial liquidity, interest rate and foreign currency exchange rate risks. Vivendi’s Financing and Treasury Department conducts these
activities, reporting directly to the chief financial officer of Vivendi, a member of the Management Board. The Department has the necessary expertise, resources,
notably technical resources and information systems for this purpose.
Vivendi uses various derivative financial instruments to manage and reduce its exposure to fluctuations in interest rates and foreign currency exchange rates.
All instruments are either listed on organized markets or traded over-the-counter with highly-rated counterparties. All derivative financial instruments are used
for hedging purposes, for which the accounting recognition is presented in the tables below4:
December 31, 2010
Accounting qualification of net assets/(liabilities)
Hedge accounting
Interest rate risk management
Foreign currency risk management
Deduction of current derivative financial instruments
Non-current derivative financial instruments
as assets
as liabilities
Fair Value Hedge
Cash Flow Hedge
accounting
Net Investment
Hedge
Economic
Hedging (a)
69
69
22
91
(22)
69
(87)
(87)
(8)
(95)
34
(61)
67
67
(1)
66
(87)
(87)
2
(85)
13
13
2
2
2
December 31, 2009
Accounting qualification of net assets/(liabilities)
Hedge accounting
Interest rate risk management
Foreign currency risk management
Deduction of current derivative financial instruments
Non-current derivative financial instruments
as assets
as liabilities
Fair Value Hedge
Cash Flow Hedge
accounting
Net Investment
Hedge
Economic
Hedging (a)
5
5
25
30
(25)
5
(208)
(195)
(13)
(17)
(225)
28
(197)
(13)
(13)
2
(11)
(127)
(127)
18
(109)
(1)
(1)
(63)
(68)
5
(11)
(74)
(a) The economic hedging instruments relate to derivative financial instruments which are not eligible for hedge accounting pursuant to IAS 39.
4. The principles and assumption methods in accounting recognition of derivative instruments are described in Note 1.3.7.
248
23.2.1. Interest rate risk management
Interest rate risk management instruments are used by Vivendi to reduce net exposure to interest rate fluctuations, to adjust the respective proportion of fixed and
floating interest rates in the total debt and to lower average net financing costs. In addition, Vivendi’s internal procedures prohibit all speculative transactions.
Average gross borrowings and average cost of borrowings
In 2010, average gross borrowings amounted to €12.7 billion (compared to €10.2 billion in 2009), of which €7.2 billion was at fixed-rates and €5.5 billion at floating
rates (compared to €5.7 and €4.5 billion in 2009, respectively). After management, the average cost of borrowings was 4.09%, with a fixed rate ratio of 61%
(compared to 4.75%, with a fixed-rate ratio of 92% in 2009).
Interest rate hedges
Interest rate risk management instruments used by Vivendi include pay-floating and pay-fixed interest rate swaps. Pay-floating swaps effectively convert fixed rate
borrowings to LIBOR and EURIBOR indexed ones. Pay-fixed interest rate swaps convert floating rate borrowings into fixed rate borrowings. These instruments enable
the group to manage and reduce volatility in future cash flows required for interest payments on borrowings.
As of December 31, 2010, borrowings totaled €11.9 billion. Before considering any interest rate risk management instruments, fixed-rate borrowings totaled 59%
at €7.0 billion. After hedging, fixed-rate borrowings totaled 52% at €6.2 billion: this change is due to the group debt restructuring achieved in November and
December 2010, aimed at reducing the fixed rate debt ratio with notably the unwinding of pay-fixed interest rate swaps for a total notional amount of €950 million
(SFR €550 million, Vivendi S.A. €400 million).
Outstanding and average income from investments
As of December 31, 2010, average cash and cash equivalents amounted to €3.3 billion in 2010 (compared to €3.0 billion in 2009), bear interest at a floating rate.
The average interest income rate amounted to 0.88% in 2010 (compared to 0.92% in 2009).
Sensitivity to changes in interest rates
As of December 31, 2010, given the relative weighting of the group’s fixed-rate and floating-rate positions, an increase of 100 basis points in short-term interest rates
(or a decrease of 100 basis points) would have resulted in a €19 million decrease in interest expense (or an increase of €19 million).
Detailed information related to interest rate risk management instruments
(The positive amounts relate to pay-fixed interest rate swaps, the negative amounts relate to pay-floating interest rate swaps).
December 31, 2010
Hedge accounting
Notional amount of hedging instruments
Average interest rate paid
Average interest rate received
Maturity
2011
2012-2015
After 2015
Maturity
2011
2012-2015
After 2015
Total
Fair Value Hedge
Cash Flow Hedge
accounting
Economic
Hedging (a)
2,335
-
(b) 2,335
3.86%
0.89%
(c) -
1,200
1,135
(3,107)
(d) (3,007)
3.60%
5.01%
1,200
1,135
-
(100)
0.78%
3.92%
(50)
(2,307)
(750)
(772)
(2,257)
(750)
(3,007)
2,335
(50)
(50)
(100)
249
December 31, 2009
Hedge accounting
Notional amount of hedging instruments
Maturity
2010
2011-2014
After 2014
Maturity
2010
2011-2014
Total
Fair Value Hedge
Cash Flow Hedge
accounting
Economic
Hedging (a)
3,885
-
2,935
3.89%
0.56%
950
4.06%
0.55%
600
2,885
400
(2,273)
(2,173)
3.83%
5.32%
600
2,335
-
550
400
(100)
0.43%
3.92%
(2,273)
1,612
(2,173)
(2,173)
2,935
(100)
850
(b) Pay-floating interest rate swaps classified as cash flow hedges for accounting purposes include:
at SFR, €1,635 million maturing in 2011, 2012 or 2013; and
at Vivendi SA, €700 million maturing in 2011 and backed to the bond issued of same amount and same maturity.
(c) As of December 31, 2010, there are no longer any pay-fixed interest rate swaps not classified as cash flow hedges for accounting purposes given that:
Vivendi SA’s pay-fixed interest rate swaps with a total notional amount of €400 million and an initial scheduled maturity of September 2015 were early
settled in November 2010; and
SFR’s pay-fixed interest rate swaps with a total notional amount of €550 million and an initial scheduled maturity of March 2013 were early settled in
December 2010.
Paid premium as part of the accelerated settlement of these hedging rate swaps amounted to €76 million.
(d) Pay-floating interest rate swaps classified as fair value hedges for accounting purposes, solely contracted by Vivendi SA, include:
€1,200 million, maturing in 2012;
€1,400 million, maturing in 2013; and
€750 million, maturing in 2017; entered into in 2010 following the issue in March 2010 of a bond of same amount with the same maturity date.
23.2.2. Foreign currency risk management
Vivendi’s foreign currency risk management seeks to hedge highly probable budget exposures, resulting primarily from monetary flows generated by activities
performed in currencies other than the euro and firm commitments, essentially relating to the acquisition of editorial content including sports, audiovisual and
film rights, realized in foreign currency.
• Foreign currency risk management is initially centralized by Vivendi SA in order to obtain the benefits associated with internal hedging and to optimize
the volume of external hedges issued from financial institutions. The tables below show the net position centralized by Vivendi SA in the main
foreign currencies.
Assets
Liabilities
Net balance before management
Net balance after management
USD
December 31, 2010
GBP
Other
USD
December 31, 2009
GBP
Other
1,335
(1,057)
278
(282)
(4)
13
(7)
6
27
33
65
(241)
(176)
190
14
1,517
(973)
544
(574)
(30)
26
(60)
(34)
34
-
44
(251)
(207)
232
25
250
A uniform euro decrease of 1% against all foreign currencies in position as of December 31, 2010, would have a cumulated impact of approximately €1 million
on net income (unchanged compared to December 31, 2009).
• Subsequently, Vivendi enters into external hedges (currency swaps and forward contracts), in accordance with procedures prohibiting speculative
transactions:
- Vivendi is the sole counterparty for foreign currency transactions within the group, unless specific regulatory or operational restrictions require
otherwise;
- all foreign currency hedging transactions are backed, in amount and by maturity, by an identified economic underlying item;
- the majority of the hedging instruments have a maturity of less than one year; and
- all identified exposures are :
- for exposures related to forecasted transactions: hedged annually at 80%; and
- for firm commitment contracts: hedged at 100%.
• In addition, Vivendi may also hedge foreign currency exposure resulting from foreign-currency denominated financial assets and liabilities by entering into
currency swaps and forward contracts enabling the refinancing or investment of cash balances in euros or other local currency and uses monetary or
derivative instruments, if applicable, to manage its foreign currency exposure to intercompany current accounts denominated in foreign currencies
(economic hedging). Nevertheless, net exposures to foreign currency risk related to net working capital from subsidiaries (primarily internal flows of
royalties as well external purchases or capital expenditures), in particular at Activision Blizzard, UMG, SFR and Maroc Telecom are not generally hedged,
as net exposures are non-significant and the relevant risks are realized at the end of each month by translating the sum into the functional currency of the
relevant operating entities.
• As of December 31, 2010,
- The group’s financial debt included 86% of loans in euro (unchanged ratio compared to December 31, 2009), representing €10,253 million. The balance of
€1,655 million essentially comprised two bonds issued for an aggregate amount of $1.4 billion dated April 2008 (please refer to Note 22.1). The foreign
currency risk of these loans is hedged at 100% by a long term loan granted by Vivendi SA to an American subsidiary.
- Vivendi SA had effectively hedged approximately 100% (unchanged compared to December 31, 2009) of its discounted foreign currency cash flows, as
well as its exposure under foreign currency loans and borrowings.
- The principal currency hedged was the US dollar.
- Firm commitment contracts were entirely hedged.
- Preliminary 2011 forecasted transactions were hedged, other than for specific cases, at 50% at the beginning of the fourth quarter 2010. Hedging was
increased up to 80% at the beginning of 2011 in accordance with Vivendi’s internal procedures with respect to foreign currency hedging related to
operations and will be reviewed in the middle of 2011.
- Nevertheless, the intercompany loan for a five-year period granted by Vivendi to GVT under market terms for €540 million (drawn for €156 million as of
December 31, 2010) is not subject to a foreign currency hedging in the GVT’s Statement of Financial Position. This loan mainly aimed at financing the
significant increase in GVT’s capital expenditures program related to the geographical expansion of its telecommunication network.
The following tables present the notional amount of foreign currency risk management instruments (currency swaps and forwards) use by Vivendi:
December 31, 2010
Hedge accounting
Total
Fair Value Hedge
Cash Flow Hedge
accounting
Net Investment
Hedge
Economic
Hedging (a)
Sales against the euro
Of which the USD-EUR sales relating to the NBC
Universal transaction
Sales against other currencies
Purchases against the euro
Purchases against other currencies
Total
3,379
79
110
2,883
307
2,883
679
15
4,073
166
13
258
127
2
239
(b) 2,883
2,883
386
693
251
December 31, 2009
Hedge accounting
Of which the USD-EUR sales relating to the NBC
Universal transaction
Total
Total
Fair Value Hedge
Cash Flow Hedge
accounting
Net Investment
Hedge
Economic
Hedging (a)
917
41
-
347
529
347
39
1,073
43
2,072
5
243
43
332
(c) 584
584
(b) 347
347
34
246
809
(b) Starting December 2009, after Vivendi had agreed that it would sell its 20% interest in NBC Universal to GE for a total amount of $5,800 million, Vivendi
1.33 dollar/Euro. From an accounting perspective, these forward contracts were qualified as net investment hedges in NBC Universal.
On September 26, 2010, forward sales contracts for a nominal value of $2,000 million were unwound for €1,425 million. On January 25, 2011, forward
sales contracts for a nominal value of $3,800 million were unwound for €2,921 million (as of December 31, 2010 they were unwound for €2,883 million).
(c) Mainly includes the EUR-BRL contract of €520 million put into place in anticipation of the investment in GVT, and to partially hedge the purchase of shares
in BRL (please refer to Note 2.1).
The following table presents the notional amounts to be delivered or received under the main currency instruments (positive amounts refer to currency
receivable and negative amounts refer to currency deliverable).
December 31, 2010
EUR
USD
BRL
Other
currency
EUR
USD
BRL
Other
currency
3,379
(679)
2,700
(3,119)
280
15
(2,824)
-
(260)
399
(15)
124
917
(1,073)
(156)
(847)
(39)
345
43
(498)
520
520
(70)
39
208
(43)
134
December 31, 2009
23.2.3. Liquidity risk management
The main factors notably considered in assessing Vivendi’s financial position are as follows:
• As of December 31, 2010, the group’s Financial Net Debt amounted to €8.1 billion.
- This amount included SFR’s Financial Net Debt of €5.8 billion, of which €2.5 billion was financed by Vivendi SA by way of a grant to SFR of revolving
facilities granted under market terms. The group’s Financial Net Debt also included the net cash position of Activision Blizzard for €2.6 billion as of
December 31, 2010 (including US government agency securities).
- Vivendi’s credit rating is BBB Stable (Standard & Poor’s and Fitch) and Baa2 Stable (Moody’s) and its “economic” average term5 was 4.0 years, compared
to 3.9 years at year-end 2009. SFR’s credit rating is BBB+ (Fitch) and its “economic” average term 6 was 2.6 years, compared to 2.3 years at year-end 2009.
Please refer to Notes 22.8 and 22.9.
- The aggregate amount of bonds issued by Vivendi SA and SFR was almost stable compared to December 31, 2009 and amounted to €7.2 billion,
representing approximately 61% of gross borrowings, compared to 62% as of December 31, 2009. The average “economic” term of the bonds issued by
the group was 3.8 years, compared to 4.1 years as of December 31, 2009. In 2010, Vivendi SA and SFR each refinanced a credit facility for €1 billion and
€1.2 billion, respectively, with initial scheduled maturity dates in 2011; the two new credit facilities will expire in 2015. Moreover, in March, Vivendi SA
placed a €750 million bond issue with a 7-year maturity and in December, Vivendi SA redeemed a portion of the bond maturing in January 2014 for
€226 million (or €259 million premium included).
5. Considers that all undrawn amounts on available medium-term credit lines may be used to repay group borrowings with the shortest term.
252
- The table below shows bonds and bank credit facilities of Vivendi SA and SFR, cumulated and due in the next five years. In this table, bank facilities
amounts relate to the maximum amount (available and issued amount, excluding amount backing commercial papers).
Bonds
Vivendi SA
SFR
Sub-total
Bank facilities
Vivendi SA
SFR
Sub-total
Vivendi SA
SFR
Total
Maturing during the following periods
2013
2014
December 31,
2010
2011
2012
5,901
1,300
7,201
700
700
600
1,000
1,600
1,229
1,229
6,000
3,702
9,702
400
400
2,271
942
3,213
11,901
5,002
16,903
700
400
1,100
2,871
1,942
4,813
2015
After 2015
894
300
1,194
-
2,478
2,478
2,729
850
3,579
-
1,000
1,510
2,510
-
3,958
850
4,808
894
300
1,194
1,000
1,510
2,510
2,478
2,478
• As of February 22, 2011, the date of the Management Board meeting which approved the Financial Statements the year ended December 31, 2010, the available
undrawn facilities of Vivendi SA, net of commercial paper issued at this date, amounted to €5.7 billion, and available credit lines of SFR, net of commercial paper
issued at this date, amounted to approximately €1.5 billion.
• In addition, the group’s adjusted Financial Net Debt as of December 31, 2010, including cash proceeds of $3.8 billion received from the sale on January 25, 2011 of
the 12.34% remaining interest in NBC Universal and the €1.254 billion proceeds received on January 14, 2011 to end the litigation over telecommunication assets in
Poland amounted to €3.9 billion. Cash and cash equivalents generated by these transactions are at this time invested in short-term cash investments (such as
SICAV, investment funds, certificates of deposit), that satisfy the criteria of cash equivalents, as defined by AMF and IAS7 recommendations.
• Furthermore, Vivendi SA centralizes daily cash surpluses (cash pooling) of all controlled entities (a) that do not have significant non-controlling interests and (b) that
are not subject to local regulations restricting the transfer of financial assets or (c) that are not subject to other contractual agreements. Alternatively, cash
surpluses are not pooled by Vivendi SA but rather, as the case may be, distributed as dividends or used to finance investments of the relevant subsidiaries, common
stock repurchase or to reimburse borrowings used to finance their investments. This situation notably applies to SFR, Maroc Telecom, and Activision Blizzard.
Regarding Activision Blizzard, until July 9, 2013, the distribution of any dividend by Activision Blizzard requires the affirmative vote of a majority of the independent
directors if Activision Blizzard’s Financial Net Debt, after giving effect to such dividend, exceeds $400 million.
Taking into account the foregoing, Vivendi considers that the cash flows generated by its operating activities, its cash and cash equivalents and amounts available
through its current bank credit facilities, will be sufficient to cover its operating expenses and capital expenditure, to service its debt, for the payment of dividends,
as well as its financial investment projects, if any for the next twelve months.
23.3. Credit and investment concentration risk and counterparty risk management
Vivendi’s risk management policy aims at minimizing the concentration of its credit (lines of credit, bonds, derivatives) and investment risk as well as counterparty risk,
as regards the setting-up of bank credit facilities, derivatives or investments, by entering into transactions only with highly rated commercial banks (essentially rated
at least A- by rating agencies), and, as regards bond issues, by distributing the transactions among selected financial investors. In addition, Vivendi’s trade receivables
do not represent a significant concentration of credit risk due to its wide customer base, the wide variety of customers and markets, and the geographic diversity of its
business operations.
253
23.4. Sensitivity of foreign currency translation risk of Financial Statements
As Vivendi operates worldwide, the currency translation of Financial Statements of certain of the group’s operating segments is sensitive to exchange rate
fluctuations (in particular the dollar (USD), the dirham (MAD), and the Brazilian real (BRL)). The following table shows the impacts of a change of more or less 5% and
10% from fixed exchange ratio of these three currencies against the euro on the main operating indicators and indebtedness of the group. (An increase represents the
appreciation of the euro against the currency concerned.)
Average exchange rate used over the year 2010
Change assumptions
Revenues
Earnings before interest and income taxes (EBIT)
Interest, net
USD (€1 = $1.33)
+5%
-0.6%
-0.2%
-0.7%
-0.3%
Exchange rate used as of December 31, 2010
Change assumptions
Redemption value of borrowings
-5%
0.6%
0.2%
0.7%
0.3%
+10%
-1.1%
-0.4%
-1.3%
-0.6%
MAD (€1 = MAD11.17)
-10%
1.3%
0.4%
1.5%
0.7%
+5%
-0.4%
-1.1%
-0.1%
-0.8%
-10%
1.0%
4.2%
+5%
-0.1%
0.0%
USD (€1 = $1.32)
+5%
-0.4%
-1.8%
-5%
0.5%
2.0%
+10%
-0.8%
-3.5%
-5%
0.4%
1.3%
0.1%
0.9%
+10%
-0.7%
-2.2%
-0.2%
-1.6%
BRL (€1 = BRL2.36)
-10%
0.9%
2.6%
0.3%
1.9%
+5%
-0.2%
-0.3%
-0.1%
-0.2%
-10%
0.2%
0.1%
+5%
-0.1%
-0.1%
MAD (€1 = MAD11.14)
-5%
0.1%
0.0%
+10%
-0.2%
-0.1%
-5%
0.2%
0.3%
0.1%
0.3%
+10%
-0.3%
-0.5%
-0.2%
-0.5%
-10%
0.4%
0.6%
0.2%
0.6%
BRL (€1 = BRL2.23)
-5%
0.1%
0.1%
+10%
-0.1%
-0.2%
-10%
0.2%
0.3%
23.5. Equity market risk management
As of December 31, 2010 and as of December 31, 2009, Vivendi’s exposure to equity market risk primarily related to available-for-sale securities, for a non-significant
amount (€50 million in 2010 and 2009). Please refer to Note 15. In 2010 and 2009, Vivendi did not put into place any equity market risk hedging.
Note 24. Consolidated Cash Flow Statement
24.1. Adjustments
Items related to operating activities with no cash impact
Amortization and depreciation of tangible and intangible assets
Change in provision, net
Other non-cash items from EBIT
Items related to investing and financing activities
Adjustments
Note
2010
2009
4
3,338
(136)
(1)
3,800
(189)
(1)
3
9
3,210
2
3,612
24.2. Investing and financing activities with no cash impact
In 2010, there were no significant investing and financing activities with any cash impact.
In 2009, financing activities with no cash impact related to the dividend payment in shares with respect to fiscal year 2008 for €904 million: the corresponding capital
increase was recorded on June 4, 2009. In addition, in 2009, there was no significant investing activity with any cash impact.
254
Note 25. Transactions with related parties
This note describes transactions with related parties performed during 2010 and 2009 which may have an impact on the results, operations or the financial position of
the group in 2011 or thereafter. As of December 31, 2010, and to the best of the company’s knowledge, no transactions with related parties as described hereunder
are likely to have a material impact on the results, operations or financial position of the group.
As a reminder, group-related parties are those companies over which the group exercises an exclusive control, joint control or significant influence, shareholders
exercising joint control over group joint ventures, non-controlling interests exercising significant influence over group subsidiaries, corporate officers, group
management and directors and companies over which the latter exercise an exclusive control, joint control, significant influence or in which they hold significant
voting rights. To the company’s knowledge there are no family relationships among the related parties.
25.1. Compensation of directors and officers
The table below is a breakdown of Vivendi’s compensation costs (including social security contributions) as well as other benefits granted to members of the
Management Board and Supervisory Board.
Short-term employee benefits (a)
Social security contributions
Post-retirement benefits (b)
Other long-term benefits
Termination benefits (c)
Share-based payments
Total costs accounted in profit and loss
2010
2009
17
2
3
ns
5
27
11
2
2
ns
8
23
ns: not significant.
(a) Includes fixed and variable compensation, benefits in kind, as well as Supervisory Board attendance fees recognized over the period. The variable
components attributable to the fiscal year 2010 amounted to €8 million and remained to be paid as of December 31, 2010. The variable components
attributable to the fiscal year 2009 amounted to €5 million which was paid in 2010.
(b) Relates to costs of the pension benefit plans (compulsory plans and additional benefit plans).
(c) Relates to the provision recognized over the period with respect to conventional indemnities upon voluntary retirement.
Mr. Lucian Grainge, was appointed as a member of the Vivendi Management Board on April 29, 2010. In addition, Mr. René Pénisson’s membership on the
Management Board expired on April 27, 2009.
Mr. Jean-Bernard Lévy waived his employment contract (suspended since April 28, 2005, the date he was appointed Chairman of the Management Board) upon the
renewal of his term of office on April 27, 2009, in accordance with the AFEP-MEDEF recommendations of October 2008 on the compensation of corporate officers of
publicly traded companies. At its meeting on February 26, 2009, the Supervisory Board approved various elements of the compensation and benefits in kind granted to
the Chairman of the Management Board and compensation payable upon the termination of his duties. These elements were approved at the Annual Shareholders’
Meeting held on April 30, 2009. At its meeting on February 25, 2010, the Supervisory Board decided not to change these compensation elements for 2010.
A breakdown of these items is presented in Sections 3.2.2.1 and 3.2.2.2 of Chapter 3 of the 2010 Annual Report.
Members of the Management Board, except the president, do not benefit from any contractual severance payments of any kind with respect to their service on the
board even upon the expiration of their term of office. However, certain members are entitled to severance payments in the event of a breach of their employment
contract (except in the event of dismissal for serious misconduct). As of December 31, 2010, the aggregate estimated amount of these obligations was €31 million
(€11 million as of December 31, 2009).
As of December 31, 2010, the net obligations in favor of the Management Board members relating to pension plans amounted to €31 million and provisions amounted
to €9 million (compared to €20 million and €6 million of provisions as of December 31, 2009). In 2010, the increase mainly resulted from both the annual update of the
valuation assumptions for defined benefits and from the increase in social security contributions. For detailed information about pension benefit plans, please refer to
Notes 1.3.8 and 20.
A detailed description of the compensation and benefits of corporate officers of the group is presented in the Annual Report.
255
25.2. Other related parties
In 2010 and 2009, most Vivendi related companies were non-controlling interests that exercise significant influence on group affiliates such as Vodafone, which owns
44% of SFR, the Kingdom of Morocco, which owns 30% of Maroc Telecom Group and Lagardère, which owns 20% of Canal+ France as well as equity affiliates such
as NBC Universal. Vivendi held a 12.34% interest in NBC Universal as of December 31, 2010 and a 20% interest as of December 31, 2009; in addition, on January 25, 2011,
Vivendi sold its entire remaining interests in NBC Universal (please refer to Note 2.2).
The following table presents the main current related-party transactions entered into with these companies and the corresponding outstanding amounts owed by
these companies or Vivendi; it does not include transactions entered into with subsidiaries controlled by the group as of December 31, 2010 and December 31, 2009
(please refer to Note 28 for a list of main consolidated entities). In addition and as a reminder, commercial relationships among subsidiaries of the group, aggregated
in operating segments, are conducted on an arm’s length basis under terms and conditions similar to those which would be offered by third parties. The cost of Vivendi
SA’s headquarters in Paris and of its New York City office, after the allocation of a portion of these costs to each of the group’s businesses, are included in the Holding
and Corporate operating segment. (Please refer to Note 3 for a detailed description of transactions between the parent company and the subsidiaries of the group,
aggregated by operating segments).
Assets
Liabilities
Contractual obligations, net off balance sheet
Statement of earnings
Revenues
Operating expenses
December 31, 2010
December 31, 2009
30
38
9
6
46
12
111
140
16
110
256
132
(243)
178
(307)
The following is a summary of the related party transactions referenced above, all of which are conducted on an arm’s length basis:
• Broadcasting rights regarding NBC Universal programs broadcast on the Canal+ Group channels and NBC Universal channels broadcast on CanalSat and a
movie production and distribution agreement with StudioCanal. As of December 31, 2010, Canal+ France and StudioCanal gave commitments relating to
these contracts amounting to approximately €175 million (compared to €293 million as of December 31, 2009), and received commitments in favor of
StudioCanal for a total amount of €8 million (compared to €10 million as of December 31, 2009). In 2010, Canal+ Group recorded a net operating expense of
€5 million (compared to €18 million in 2009) in respect of commercial transactions with NBC Universal and its subsidiaries. As of December 31, 2010, total
receivables amounted to €25 million (compared to €28 million December 31, 2009), and total payables amounted to €6 million (compared to €30 million as
of December 31, 2009). In addition, StudioCanal invested up to €14 million in co-production projects (compared to €9 million as of December 31, 2009);
• Agreements entered into 2006 with Lagardère which give Canal+ France the right to broadcast their theme channels on its multi-channel offer for a period
of five years as a result of the Canal+ Group and TPS combination of the pay-TV activities in France. These agreements have been extended through
June 30, 2013; and
• Cooperation and roaming agreements between SFR and Vodafone Group. These contracts generated a net expense of €43 million for SFR in 2010
(compared to €42 million in 2009).
256
Note 26. Contractual obligations and other commitments
Vivendi’s material contractual obligations and contingent assets and liabilities include:
• contracts related to operations such as content commitments (please refer to Note 10.2), contractual obligations and commercial commitments recorded in
the Statement of Financial Position, including finance leases (please refer to Note 12), off-balance sheet operating leases and subleases and off-balance
sheet commercial commitments, such as long-term service contracts and purchase or investment commitments;
• commitments related to the group’s scope contracted through acquisitions or divestitures such as share purchase or sale commitments, contingent assets
and liabilities subsequent to given or received commitments related to the divestiture or acquisition of shares, commitments resulting from shareholders’
agreements and collateral and pledges granted to third parties over Vivendi’s assets;
• commitments related to the group’s financing: borrowings issued as well as management of interest rate, foreign currency and liquidity risks (please refer
to Notes 22 and 23); and
• contingent assets and liabilities linked to litigations in which Vivendi and/or its subsidiaries are either plaintiff or defendant (please refer to Note 27).
26.1. Contractual obligations and commercial commitments
Below is a summary of the group’s contractual obligations and commercial commitments as of December 31, 2010 and December 31, 2009. Further information is
provided in Notes 26.1.1 and 26.1.2 and in the notes referenced in the table below.
Content liabilities
Subtotal - future minimum payments related to the consolidated statement of
financial position items
Contractual content commitments
Commercial commitments
Operating leases and subleases
Subtotal - not recorded in the consolidated statement of financial position
Total contractual obligations and commercial commitments
As of December 31, 2010
Payments due in
2011
2012-2015
After 2015
Total as of
December 31, 2009
Note
Total
22
10.2
13,693
2,108
3,846
2,046
6,980
58
2,867
4
15,133
2,064
15,801
3,436
2,411
2,620
8,467
24,268
5,892
1,829
1,231
504
3,564
9,456
7,038
1,403
729
1,347
3,479
10,517
2,871
204
451
769
1,424
4,295
17,197
4,317
2,181
2,466
8,964
26,161
10.2
26.1.1
26.1.2
257
26.1.1. Off balance sheet commercial commitments
Due in
Total
2011
2012-2015
After 2015
Total - minimum
future payments
as of December 31,
2009
Satellite transponders
Investment commitments (a)
Other
Given commitments
Satellite transponders
Other (b)
Received commitments
Net total
839
1,373
376
2,588
(79)
(98)
(177)
2,411
141
988
179
1,308
(29)
(48)
(77)
1,231
472
174
183
829
(50)
(50)
(100)
729
226
211
14
451
451
629
1,472
167
2,268
(67)
(20)
(87)
2,181
(a) Mainly relates to SFR and Maroc Telecom Group:
• SFR: €362 million as of December 31, 2010 (compared to €407 million as of December 31, 2009) related to public service delegations. Businesses
related to these delegations of public service consist of setting up and operating telecommunication facilities in certain areas of France for local or
regional authorities, as delegors. In addition, as of December 31, 2009, SFR’s commitments included the exchange of mobile equipment purchased
from Nokia Siemens Network in 2007, for new equipment purchased by SFR for an equivalent amount. This transaction was completed in 2010.
• Maroc Telecom SA and its capital expenditure program: on May 21, 2009, Maroc Telecom and the Moroccan State entered into a third capital
expenditure agreement pursuant to which Maroc Telecom committed to carrying out a capital expenditure program for a total amount of MAD
10.5 billion (approximately €930 million) over the period 2009-2011. As of December 31, 2010, approximately €236 million of the capital expenditure
program had yet to be spent (compared to approximately €596 million as of December 31, 2009). These investments, aimed at expanding and
modernizing infrastructures, notably include investments dedicated to the coverage of isolated rural and mountainous regions as part of the PACTE
universal telecommunications service program. More than 7,300 cities are expected to be covered by 2011.
• Regarding Maroc Telecom Group’s subsidiaries (Sotelma since August 1, 2009, Onatel, Mauritel and Gabon Telecom): their capital expenditure
amounted to €77 million as of December 31, 2010, compared to €70 million as of December 31, 2009.
(b) Mainly relates to commitments received from Bouygues Telecom to SFR regarding the agreement to share their investments and their fiber-optic
horizontal networks in very high density areas.
26.1.2. Off balance sheet operating leases and subleases
Minimum future leases as of December 31, 2010
Due in
Total
2011
2012-2015
After 2015
Buildings (a)
Other
Leases
Buildings (a)
Subleases
Net total
2,379
289
2,668
(48)
(48)
2,620
431
89
520
(16)
(16)
504
1,226
145
1,371
(24)
(24)
1,347
722
55
777
(8)
(8)
769
Total - minimum
future leases as of
December 31, 2009
2,282
234
2,516
(50)
(50)
2,466
(a) Mainly relates to offices and technical premises.
As of December 31, 2010, provisions of €10 million were recorded in the Statement of Financial Position with respect to operating leases (compared to €12 million as
of December 31, 2009). These provisions mainly related to unoccupied buildings.
In 2010, net expense recorded in the statement of earnings with respect to operating leases amounted to €591 million (compared to €484 million in 2009).
The increase of €107 million mainly reflected the integration of GVT (€83 million), which Vivendi took over November 13, 2009.
258
26.2. Other commitments given or received relating to operations
Ref.
(a)
Context
Contingent liabilities
Obligations related to the permission to use the Consolidated Global
Profit System
Individual rights to training for French employees
UMTS network coverage (3G) at SFR
(b)
(c)
GSM-R commitment
Obligations in connection with pension plans and post-retirement benefits
Commitment to contribute to the VUPS pension fund
(d)
Various other miscellaneous guarantees given
Contingent assets
Various other miscellaneous guarantees received
Main characteristics (nature and amount)
Expiry
Payment of approximately €5 million annually.
2011
Approximately 1.5 million hours, compared to approximately 1.3 million
hours as of December 31, 2009.
Please refer to Note 13 "Property, Plant, Equipment and Intangible Assets
of Telecom Operations".
€21 million joint and several guarantee with Synerail.
Please refer to Note 20 "Employee benefits".
Guarantee equal to 125% of the accounting deficit (approximately
£5 million, compared to approximately £11 million as of December 31, 2009).
Cumulated amount of €216 million (compared to €163 million as of
December 31, 2009).
-
Cumulated amount of €209 million (compared to €162 million as of
December 31, 2009).
2013
2025
2011
-
-
(a) By an order dated March 13, 2009, authorization to use the Consolidated Global Profit Tax System under Article 209 quinquies of the French tax code was
renewed for the period beginning on January 1, 2009 and ending on December 31, 2011. Under the terms of the permission to use the Consolidated Global
Profit Tax System, Vivendi undertook to continue to perform its previous years’ commitments, in particular with regard to job creation (Please refer to
Note 6.1).
(b) On February 18, 2010, a group constituted by SFR, Vinci and AXA (30% each) and TDF (10%) entered into a contract with Réseau Ferré de France regarding
the public-private partnership GSM-R. The 15-year contract, valued at approximately €1 billion, covers the financing, building, operation and maintenance
of the digital telecommunications network that enables conference mode communications (voice and data) between train drivers and teams on the
ground. It will be rolled out gradually until 2015 over 14,000 km of conventional and high-speed railway lines in France.
(c) This guarantee, which expired in January 2011, generated no additional financial commitment compared to those described in Note 20.
(d) Vivendi grants guarantees in various forms to financial institutions on behalf of its subsidiaries in the course of their operations.
26.3. Share purchase and sale commitments
In connection with the purchase or sale of operations and financial assets, Vivendi grants or receives commitments to purchase or sell securities. The main
commitments of this nature relate to Vivendi’s interest in NBC Universal and in the share capital of Canal+ France; please refer to Note 2.2 and 18, for a detailed
description of the sale of Vivendi’s interest in NBC Universal and transactions completed or in progress related to Canal+ France’s non- controlling interests.
In addition, as of December 31, 2009, Vivendi had committed to purchase the GVT shares that it did not hold at that date: please refer to Note 2.1 for a detailed
description of the completion of GVT’s acquisition.
Furthermore, Vivendi and its subsidiaries have granted or received purchase or sale options related to shares in equity affiliates and unconsolidated investments.
259
26.4. Contingent assets and liabilities subsequent to given or received commitments related to the
divestiture or acquisition of shares
Ref.
Context
(a)
Contingent liabilities
NBC-Universal transaction (May 2004) and subsequent amendments
(2005 - 2010)
(b)
(c)
Creation of Activision Blizzard (July 2008)
Divestiture of UMG manufacturing and distribution operations (May 2005)
Take over of Neuf Cegetel by SFR (April 2008)
Combination of the Canal+ Group and TPS pay-TV activities in France
(January 2007)
(d)
Divestiture of Canal+ Nordic (October 2003)
(e)
Divestiture of NC Numéricâble (March 2005)
Divestiture of PSG (June 2006)
Divestiture of Sithe (December 2000)
Sale of real estate assets (June 2002)
(f)
(g)
(h)
Early settlement of rental guarantees related to the last three buildings in
Germany (November 2007)
(c)
Expiry
- Breaches of tax representations;
- Obligation to cover the Most Favored Nation provisions; and
- Remedial actions.
Tax sharing and indemnity agreements.
Various commitments for manufacturing and distribution services.
Commitments undertaken in connection with the authorization of the take
over by the French Minister of the Economy, Industry and Employment.
-
- Commitments in connection with the authorization of the combination
pursuant to the merger control regulations;
- General guarantees expired on January 4, 2009;
- Tax and social guarantees with a €162 million cap; and
- Counter-guarantees granted to TF1 and M6 as part of certain
commitments.
- Specific guarantee capped at €50 million, expired in April 2010; and
- Specific guarantees given to American studios expired at the end of June
2009.
Specific guarantees capped at €241 million (including tax and social risks).
Unlimited specific guarantees.
Specific guarantees capped at $480 million.
Autonomous first demand guarantees capped at €150 million in total (tax
and decennial guarantees).
2014
2015
2012
2012
2009
2011
2013
2010
2009
2014
2018
2017
2026
Guarantees of rental payments obligations of the companies sold in the
transaction in the amount of €304 million as of December 31, 2010
(€331 million as of December 2009).
Specific guarantee expired on September 25, 2009 relating to a claim
formed by the Republic of Colombia and certain of its political subdivisions.
Guarantees capped at €48 million (€57 million as of December 31, 2009).
-
- Guarantees capped at €358 million, expired on January 20, 2009; and
- Commitments on the handling and distribution of audio-visual content.
2009
2012
Combination of the Canal+ Group and TPS pay-TV activities in France
(January 2007)
Vendor warranties received from TF1 and M6 capped at €112 million,
expired in 2010.
2010
Acquisition of Kinowelt (April 2008)
- General and specific guarantees regarding movie rights property given by
the sellers to EuroMedien Babelsberg GmbH; and
- Specific guarantees, notably on film rights were granted by the sellers.
€151 million counter-guaranteed by France Télécom.
Guarantees amounting to €71 million.
2013
Divestiture of Spirits and Wine activities of Seagram (2001)
(i)
Characteristics (nature and amount)
Other
Contingent assets
Acquisition of Tele2 France by SFR (July 2007)
(e)
(j)
Divestiture of NC Numéricâble (March 2005)
Divestiture of Xfera (2003)
(h)
Early settlement of rental guarantees related to the last three buildings in
Germany (November 2007)
Elektrim/PTC
Other
- Pledge over the cash of the divested companies;
- Counter-guarantee provided by the purchaser in the amount of
€200 million; and
- Additional purchase price of up to €10 million, under certain conditions.
- €1,254 million proceed received on January 14, 2011; and
- Reciprocal commitment with third parties (please refer to Note 2.4).
Cumulated amount of €33 million (€28 million as of December 31, 2009).
2009
2014
-
2011
-
260
The accompanying notes are an integral part of the contingent assets and liabilities described above.
(a) As part of the NBC-Universal transaction which occurred in May 2004, Vivendi and General Electric (GE) gave certain reciprocal commitments customary
for this type of transaction, and Vivendi retained certain liabilities relating to taxes and excluded assets. Vivendi and GE undertook to indemnify each
other against losses resulting from, among other things, any breach of their respective representations, warranties and covenants.
Neither party will have any indemnification obligations for losses arising as a result of any breach of representations and warranties (i) for any individual
item where the loss is less than $10 million and (ii) in respect of each individual item where the loss is equal to or greater than $10 million except where
the aggregate amount of all losses exceeds $325 million. In that event, the liable party will be required to pay the amount of losses which exceeds
$325 million, but in no event will the aggregate indemnification payable exceed $2,088 million.
In addition, Vivendi will have indemnification obligations for 50% of every U.S. dollar of loss up to $50 million and for all losses in excess of $50 million
relating to liabilities arising out of the Most Favored Nation provisions set forth in certain contracts. As part of the unwinding of IACI’s interest in VUE on
June 7, 2005, Vivendi’s commitments with regard to environmental matters were amended and Vivendi’s liability is now subject to a de minimis exception
of $10 million and a payment basket of $325 million.
The representations and warranties other than those regarding authorization, capitalization and tax representations terminated on August 11, 2005.
Notices of environmental claims related to remediation must be brought by May 11, 2014. Other claims, including those related to taxes, will be subject to
applicable statutes of limitations. None of the provisions described in this paragraph were amended by the Agreement signed in December 2009 between
Vivendi and GE relating to the agreement between GE and Comcast regarding NBC Universal, or by the completion of the sale of Vivendi’s entire interest
in NBC Universal, completed on January 25, 2011 (please refer to Note 26.3).
(b) Approval from the Ministry of Economy, Industry and Employment, dated April 15, 2008, resulted in additional commitments from Vivendi and its
subsidiaries. They address competitor access and new market entrants to wholesale markets on SFR’s fixed and mobile networks, acceptance on the fixed
network of an independent television distributor if such a player appears, as well as the availability, on a non-exclusive basis, of ADSL on eight new
channels which are leaders in their particular areas (Paris Première, Teva, Jimmy, Ciné Cinéma Famiz, three M6 Music channels and Fun TV). A detailed
summary of the commitments undertaken by the Vivendi group and SFR is available on Vivendi’s website at the following address:
http://www.vivendi.com/vivendi/SFR,262.
In addition, following successful completion of the tender offer pursuant to which SFR obtained a 96.41% equity interest in Neuf Cegetel, SFR launched
a squeeze-out for the remaining outstanding Neuf Cegetel shares. The funds relating to compensation for the Neuf Cegetel shares which are not claimed
by depository institutions on behalf of beneficiaries, shall be held by CACEIS Corporate Trust for a period of 10 years commencing on the effective date of
the squeeze-out (June 24, 2008) and then paid to the Caisse des Dépôts et Consignations upon expiration of this deadline. These funds may be claimed
by beneficiaries at any time subject to a thirty-year statute of limitations period, after which time the funds shall be paid to the French State.
Finally, the shares owned (but currently in a holding period) by executives and employees of Ex-Neuf Cegetel are subject to reciprocal put and call option
agreements with SFR, with a maturity of 2011 at the latest.
(c) On August 30, 2006, the TPS/Canal+ Group merger was authorized, in accordance with the merger control regulations, pursuant to a decision of the
French Minister of Economy, Finance and Industry, subject to Vivendi and Canal+ Group complying with certain undertakings. Without questioning the
pay-TV economic model, or the industrial rationale behind the transaction and the benefits to the consumer, these commitments satisfy, more specifically,
the following objectives:
• facilitate the television and video-on-demand (VOD) operators’ access to attractive audiovisual content rights and, in particular, French and U.S. films
and sporting events. To this end, the Canal+ Group undertook, notably, to restrict to a maximum term of three years the duration of future framework
agreements with major US studios, not to seek exclusive VOD rights, to guarantee non-discriminatory access to the StudioCanal catalogue, to restrict
the proportion of films taken from this catalogue in the acquisition of films by the future entity and to cease soliciting combined offers for different
categories of cinematographic and sporting rights.
In addition, the Canal+ Group undertook to retrocede, within the framework of competition requirements, free-to-air audiovisuals rights to TV series
and sporting events that the new entity may hold and does not use, more specifically to;
• make available several high-quality channels to all pay-TV distributors upon request, enabling these distributors to develop attractive products.
Third parties will be provided access to TPS Star, three cinema channels (CinéStar, CinéCulte, CinéToile), Sport+ and the children’s channels Piwi and
Teletoon. In addition, Canal+ will be available in digital (self distribution) to all operators wishing to include this channel in their product range; and
• enable French-language independent licensed channels to be included in the satellite offerings of the new group. The current proportion of theme
channels in the group’s offerings that are neither controlled by the Canal+ Group or one of the minority shareholders in the new entity, will be retained
at the current level as a minimum, including in the basic offering. This guarantee applies in terms of both the number of channels and revenue.
These commitments were given by Vivendi and the Canal+ Group for a maximum period of six years, with the exception of those commitments concerning
the availability of channels and VOD, which cannot exceed five years.
In addition, as part of the sale of a 20% interest in Canal+ France to Lagardère Active as of January 4, 2007, Canal+ Group made tax and social
representations and warranties to Lagardère Active with a €162 million cap on the entities held by Canal+ France, excluding Canal Satellite,
MultiThématiques and the TPS entities. The general guarantees expired on January 4, 2009 except for the tax and social guarantees which expired on
January 4, 2011.
Moreover, Vivendi granted a counter-guarantee, which will expire on January 4, 2013, in favor of TF1 and M6 in order to assume commitments and
guarantees made by TF1 and M6 in connection with some of the contractual content commitments and other long term obligations of TPS and other
obligations recognized in the statement of financial position of TPS.
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(d) In connection with the divestiture of Canal+ Nordic in October 2003, Canal+ Group granted a specific guarantee with a cap of €50 million which expired in
April 2010. Canal+ Group has also retained distribution guarantees given in favor of Canal Digital and Telenor Broadcast Holding by a former subsidiary
which guarantees are covered by a counter-guarantee given by the buyers. All guarantees given to American studios expired in June 2009.
(e) As part of the divestiture of NC Numéricâble on March 31, 2005, the Canal+ Group granted specific guarantees with a €241 million cap (including tax and
social risks). Specific risks relating to cable networks used by NC Numéricâble are included in this maximum amount and are counter-guaranteed by France
Télécom up to €151 million. In addition, in January 2006, Canal+ Group received as part of the final divestiture of its 20% interest in Ypso, the right to a
potential earn-out payment under certain conditions which was not valued in the off-balance sheet accounts.
(f) In connection with the sale of its 49.9% interest in Sithe to Exelon in December 2000, Vivendi granted customary representations and guarantees.
Claims, other than those made in relation to foreign subsidiary commitments, are capped at $480 million. In addition, claims must exceed $15 million,
except if they relate to foreign subsidiaries or the divestiture of certain electrical stations to Reliant in February 2000. Some of these guarantees expired
on December 18, 2005. Some environmental commitments still exist and any potential liabilities related to contamination risks will survive for an
indefinite period of time.
(g) In connection with the sale of real estate assets in June 2002 to Nexity, Vivendi granted two autonomous first demand guarantees, one for €40 million
and one for €110 million, to several subsidiaries of Nexity (Nexim 1 to 6). The guarantees are effective until June 30, 2017.
(h) As part of the early settlement of rental guarantees relating to the three remaining buildings owned in Germany (Lindencorso, Anthropolis/
Grindelwaldweg and Dianapark) at the end of November 2007. Vivendi agreed to continue to guarantee certain lease payment obligations (i.e.,
€304 million, compared to €331 million as of December 31, 2009) of the companies it sold in the transaction until December 31, 2026. Vivendi also
granted standard guarantees, including tax indemnities. In return for such guarantee, Vivendi received a pledge over the cash of the divested companies
for €56 million (compared to €70 million as of December 31, 2009) and a counter-guarantee provided by the purchaser in the amount of €200 million.
In addition, as part of a new agreement entered into with the acquiror in June 2009, Vivendi received a €40 million payment in December 2009 from
an account pledged to its benefit, and may receive another payment of €10 million depending on the conditions of the reorganization of the structure.
In exchange, the lease transactions are set to terminate at the latest, respectively, on December 31, 2012 (Anthropolis/Grindenwaldweg), on March 31, 2016
(Dianapark) and on December 31, 2016 (Lindencorso).
(i) The Share Purchase Agreement (SPA) dated October 2, 2006 between Tele2 Europe SA and SFR contains representations and warranties which expired
on January 20, 2009 except for those claims arising with respect to tax and social matters for which the expiration period is three months following the
expiration of the applicable statute of limitations. On July 18, 2007, by way of implementation of the European Union antitrust regulation, the European
Commission approved the purchase of the fixed and internet activities of Tele2 France by SFR, subject to commitments on the handling and distribution
of audio-visual content for a five year period. A detailed summary of the commitments undertaken by the Vivendi group and SFR is available on Vivendi’s
website at the following address: http://www.vivendi.com/vivendi/SFR,262.
(j) Vivendi received guarantees in respect of the repayment of amounts paid in July 2007 (€71 million), in the event of a favourable decision of the Spanish
Courts concerning Xfera’s tax litigation to cancel the 2001, 2002 and 2003 radio spectrum fees. These guarantees include a first demand bank guarantee
relating to 2001 fees for an amount of €57 million.
Several guarantees given in 2010 and during prior years in connection with asset acquisitions or disposals have expired. However, the time periods or statute of
limitations of certain guarantees relating, among other things, to employees, environment and tax liabilities, in consideration of share ownership, or given in
connection with the dissolution or winding-up of certain businesses are still active. To the best of Vivendi’s knowledge, no material claims for indemnification against
such liabilities have been made to date.
In addition, Vivendi regularly delivers, at the settlement of disputes and litigations, commitments for damages to third parties, which is typical in such transactions.
26.5. Shareholders’ agreements
Under existing shareholders’ or investors’ agreements (including those relating to Activision Blizzard, SFR, Maroc Telecom Group and Canal+ France), Vivendi holds
certain rights (such as pre-emptive rights, priority rights) which give it control over the capital structure of consolidated companies partially owned by minority
shareholders. Conversely, Vivendi has granted similar rights to these other shareholders in the event that it sells its interests to third parties.
In addition, pursuant to other shareholders’ agreements or the bylaws of consolidated entities, equity affiliates or unconsolidated interests, Vivendi and its
subsidiaries have given or received certain rights (pre-emptive and other rights) entitling them to maintain their shareholder’s rights.
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Shareholders’ Agreement among Vivendi, TF1 and M6
Pursuant to the Shareholders’ Agreement among Vivendi, TF1 and M6, dated January 4, 2007, TF1 and M6 were granted a tag-along right in the event of the transfer
of the exclusive control of Canal+ France by Vivendi/Canal+ Group, together with a priority right to sell their stakes on the market in the event of a public offering of
Canal+ France’s shares. TF1 and M6 were not represented on the supervisory board of Canal+ France and did not have rights of any kind in respect of the management
of Canal+ France. Vivendi had a pre-emptive right over all the shares of Canal+ France owned by TF1 and M6.
As of December 31, 2010, TF1 and M6 had exited from the share capital of Canal+ France (please refer to Note 18), and thus from the shareholders’ agreement.
Strategic Agreements among Vivendi, Canal+ Group, Lagardère and Lagardère Active
Pursuant to the Canal+ France strategic agreements entered into on January 4, 2007, Lagardère was granted rights to maintain its economic interest in Canal+ France,
with varying rights according to the level of its participation in Canal+ France. Under no circumstances will Lagardère have any joint control of Canal+ France.
The main provisions of these strategic agreements are as follows:
• The Chairman and all the members of the management board of Canal+ France are appointed by Canal+ Group. Lagardère is represented by two members
out of the eleven members of the supervisory board.
• Lagardère has certain veto rights over Canal+ France and, in certain cases, over its major subsidiaries including in the event of a change in the by-laws, a
major permanent change in the business, its transformation into a company in which the partners would have unlimited liability, a single investment
representing more than a third of revenues, a tender offer for the company’s shares, in certain circumstances the entry of a third party as a shareholder,
and certain other rights (including a tag-along right, an anti-dilution right, certain bidding rights in the event of the sale of Canal+ France) intended to
protect its economic interest. Vivendi has a pre-emptive right in the event of a sale of Lagardère’s equity interest.
• Between 2008 and beginning 2015, Lagardère will have a liquidity right exercisable between March 15 and April 15 of each calendar year, provided,
however, that Lagardère owns at least 10% but no more than 20% of the capital and voting rights of Canal+ France, (and taking into account the fact that
Lagardère waived its right to exercise its call option enabling it to own 34% of the capital of Canal+ France). Pursuant to this liquidity right, Lagardère is
entitled to request a public offering of Canal+ France shares. On April 15, 2010, Lagardère decided to exercise its liquidity right regarding its 20% interest
in Canal+ France. As Lagardère and Vivendi had not reached an agreement regarding the sale of its interest, Lagardère decided on July 2, 2010 to launch
an Initial Public Offering (IPO) process. The Initial Public Offering (IPO) process is still in progress: on February 16, 2011, Canal+ France filed the Initial Public
Offering (IPO) Prospectus with the French Autorité des Marchés Financiers (AMF). In this event, Vivendi/Canal+ Group have the right to acquire all of
Lagardère’s equity interest.
• The financing of Canal+ France has been structured through a mechanism which includes shareholders’ loans and the delivery of guarantees with respect
to Canal+ France’s obligations. Pursuant to this mechanism, Lagardère has the option to participate in such financing and guarantee arrangements pro rata
its level of ownership in the share capital of the company.
In addition, in compliance with Article L. 225-100-3 of the French Commercial Code, it is stated that some rights and obligations of Vivendi resulting from shareholders’
agreements (SFR, Maroc Telecom Group, and Cyfra+) may be amended or terminated in the event of a change in control of Vivendi or a tender offer being made for
Vivendi. These shareholders’ agreements are subject to confidentiality provisions.
26.6. Collaterals and pledges
As of December 31, 2010, the amount of the group’s assets that were pledged or mortgaged for the benefit of third parties was €151 million (compared to €106 million
as of December 31, 2009). Moreover, Vivendi has no guarantees from third parties in respect of any of its receivables outstanding as of December 31, 2010 nor did it
have any as of December 31, 2009.
Note 27. Litigation
In the normal course of its business, Vivendi is subject to various lawsuits, arbitrations and governmental, administrative or other proceedings (collectively referred to
herein as “Legal Proceedings”).
The costs which may result from these proceedings are only recognized as provisions when they are likely to be incurred and when the obligation can be reasonably
quantified or estimated, in which case, the amount of the provision represents Vivendi’s best estimate of the risk, provided that Vivendi may, at any time, reassess
such risk if events occur during such proceedings. As of December 31, 2010, provisions recorded by Vivendi for all claims and litigations amounted to €443 million in
2010, compared to €890 million in 2009 (please refer to Note 19).
To the company’s knowledge, there are no Legal Proceedings or any facts of an exceptional nature, including, to the company’s knowledge, any pending or threatened
proceedings in which it is a defendant, which may have or have had in the previous twelve months a significant impact on the company’s and on its group’s financial
position, profit, business and property, other than those described herein.
The status of proceedings disclosed hereunder is described as of February 22, 2011, the date of the Management Board meeting held to approve Vivendi’s financial
statements for the year ended December 31, 2010.
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Trial of Vivendi’s former officers in Paris
In October 2002, the financial department of the Parquet de Paris launched an investigation into the publication of false or misleading information regarding the
financial situation and forecasts of the company and the publication of untrue or inaccurate financial statements for the fiscal years 2000 and 2001. Additional charges
were brought in this investigation relating to purchases of its own shares by the company between September 1, 2001 and December 31, 2001, following the filing by
the AMF of an investigation report with the Parquet de Paris on June 6, 2005. Vivendi joined the proceedings as a civil party.
On January 23, 2009, the Public Prosecutor transmitted to the judge and civil parties a final prosecutor’s decision of dismissal in respect of all matters under
investigation during the period 2000-2002. On October 16, 2009, the Judge Mr. Jean-Marie d’Huy ordered all parties to face trial before the Criminal Court.
The charges of disclosure and publication of untrue or inaccurate financial statements were rejected by the Judge. The trial took place from June 2 to June 25, 2010,
before the 11th Chamber of the Paris Tribunal of First Instance (Tribunal de Grande Instance de Paris). The Prosecutor asked the Court to drop charges against the
defendants.
The Court rendered its judgment on January 21, 2011. The previous recognition of Vivendi as a civil party was confirmed. Jean Marie Messier, Guillaume Hannezo,
Edgar Bronfman Jr. and Eric Licoys received suspended sentences and fines. Jean-Marie Messier and Guillaume Hannezo were also ordered to pay damages to
shareholders entitled to reparation as civil parties. The former Vivendi officers as well as some civil parties appealed the decision.
Since July 18, 2002, sixteen claims have been filed against Vivendi, Messrs. Jean-Marie Messier and Guillaume Hannezo in the United States District Court for the
Southern District of New York and in the United States District Court for the Central District of California. On September 30, 2002, the New York court decided to
consolidate these claims in a single action under its jurisdiction entitled In re Vivendi Universal S.A. Securities Litigation.
The plaintiffs allege that, between October 30, 2000 and August 14, 2002, the defendants violated certain provisions of the US Securities Act of 1933 and US
Securities Exchange Act of 1934, particularly with regard to financial communications. On January 7, 2003, the plaintiffs filed a consolidated class action suit that may
benefit potential groups of shareholders.
On March 22, 2007, the Court decided, concerning the procedure for certification of the potential claimants as a class (“class certification”), that persons from the
United States, France, England and the Netherlands who purchased or acquired shares or ADS of Vivendi (formerly Vivendi Universal SA) between October 30, 2000
and August 14, 2002, could be included in the class.
On April 9, 2007, Vivendi filed an appeal against this decision. On May 8, 2007, the United States Court of Appeals for the Second Circuit denied Vivendi’s petition
seeking review of the District Court’s decision with respect to class certification. On August 6, 2007, Vivendi filed a petition with the Supreme Court of the United
States for a Writ of Certiori seeking to appeal the Second Circuit’s decision on class certification. On October 9, 2007, the Supreme Court denied the petition.
On March 12, 2008, Vivendi filed a motion for reconsideration of the Court’s class certification decision dated March 22, 2007, that included French shareholders in the
plaintiff class. On March 31, 2009, the Court denied that motion.
Following the March 22, 2007 certification decision, a number of individual cases were filed against Vivendi on the same grounds as the class action. On December 14, 2007,
the judge issued an order consolidating the individual actions with the securities class action for purposes of discovery. On March 2, 2009, the Court deconsolidated
the Liberty Media action from the class action. On August 12, 2009, the Court issued an order deconsolidating the individual actions from the class action. The Liberty
Media and individual plaintiffs’ actions remain pending against the company.
The trial of the class action lawsuit commenced on October 5, 2009, in New York.
On January 29, 2010, the jury returned its verdict. It found that 57 statements made by Vivendi between October 30, 2000, and August 14, 2002, were materially false
or misleading and were made in violation of Section 10(b) of the Securities Exchange Act of 1934. Plaintiffs had alleged that those statements were false and
misleading because they failed to disclose the existence of an alleged “liquidity risk” which reached its peak in December 2001. However, the jury concluded that
neither Mr. Jean-Marie Messier nor Mr. Guillaume Hannezo were liable for the alleged misstatements.
As part of its verdict, the jury found that the price of Vivendi’s shares was artificially inflated on each day of the class period in an amount between €0.15 and €11.00
per ordinary share and $0.13 and $10.00 per American Depository Receipt (“ADR”), depending on the date of purchase of each ordinary share or ADR. Those figures
represent approximately half the amounts sought by the plaintiffs in the class action. The jury also concluded that the inflation of the Vivendi share price fell to zero in
the three weeks following the September 11, 2001, tragedy, as well as on stock exchange holidays on the Paris or New York markets (12 days) during the class period.
On March 26, 2010, Vivendi filed certain post-trial motions with the Court, challenging the jury’s verdict.
On June 24, 2010, the US Supreme Court, in a very clear statement, ruled, in the Morrison v. National Australia Bank case, that American securities law only applies to
“the purchase or sale of a security listed on an American stock exchange”, and to “the purchase or sale of any other security in the United States.”
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At a hearing that took place in New York on July 26, 2010, Vivendi petitioned the Court to apply the “Morrison” decision and therefore to exclude from the class
shareholders who did not purchase or sell their shares on a U.S. exchange.
In a decision dated February 17, 2011 and issued on February 22, 2011, the Court, in applying the “Morrison” decision, confirmed Vivendi’s position by dismissing the claims
of all purchasers of Vivendi’s ordinary shares on the Paris stock exchange and limited the case to claims of French, American, British and Dutch purchasers of Vivendi’s
ADSs on the New York Stock Exchange. The Court declined to enter a final judgment, as had been requested by the plaintiffs, saying that to do so would be premature and
that the process of examining individual shareholder claims must first take place. The Court denied Vivendi’s post-trial motions challenging the jury’s verdict.
Vivendi still believes that it has solid grounds for an appeal, at the appropriate times. Vivendi intends to challenge, among other issues, plaintiffs’ theories of
causation and damages accepted by the judge and, more generally, certain decisions made by the judge during the conduct of the trial. Several aspects of the
verdict will also be challenged.
On the basis of the verdict rendered on January 29, 2010, and an assessment of the matters set forth above supported by studies conducted by companies specializing
in the calculation of class action damages and in accordance with the accounting principles described in Notes 1.3.1 (Use of Estimates) and 1.3.8 (Provisions), Vivendi
made a provision on December 31, 2009, in an amount of €550 million in respect of the damages that Vivendi might have to pay to class plaintiffs. Vivendi re-examined
the amount of the reserve related to the Securities class action litigation in the United States, given the District Court for the Southern District of New-York decision
on February 17, 2011 in our case, which followed the US Supreme Court’s decision on June 24, 2010 in the Morrison case. Using the same methodology and the same
valuation experts as in 2009, Vivendi re-examined the amount of the reserve and set it at €100 million as of December 31, 2010, in respect of the damages, if any, that
Vivendi might have to pay solely to shareholders who have purchased ADSs in the United States. Consequently, as of December 31, 2010, Vivendi recognized a
€450 million reversal of reserve, compared to an accrual of €550 million as of December 31, 2009.
Vivendi considers that its provision and the assumptions on which it is based may have to be amended as the proceedings progress, and consequently, the present amount
of damages that Vivendi might have to pay the plaintiffs could differ significantly, in either direction, from the provision. As is permitted by current accounting standards, no
details are given of the assumptions on which this estimate is based, because their disclosure at this stage of the proceedings could be prejudicial to Vivendi.
From 1999 until 2001, Vivendi invested in the capital of Polska Telefonia Cyfrowa Sp. Z.o.o. (PTC), the Polish mobile telephone operator. Vivendi made this investment
through Elektrim Telekomunikajca Sp. z o.o. (Telco) and Carcom Warszawa (Carcom), two companies that were formed together with Elektrim SA.
These shareholdings were the subject of several litigation proceedings, among which were several arbitration proceedings initiated by Deutsche Telekom in Vienna,
aiming, among others, at invalidating the transfer of the PTC shares from Elektrim to Telco, an arbitration proceedings before the London Court of International
Arbitration (LCIA), launched by Vivendi against Elektrim regarding the Telco shareholders’ agreement entered into by both companies, an arbitration proceedings
launched by Vivendi against the Republic of Poland, based on the treaty entered into between France and Poland relating to the reciprocal encouragement and
protection of investments, as well as numerous other proceedings before Polish courts.
On December 14, 2010, Vivendi entered into certain agreements with Deutsche Telekom, Mr. Zygmunt Solorz-Zak (the main shareholder of Elektrim) and the creditors
of Elektrim, including the Polish State and Elektrim’s bondholders, aiming at putting an end to the litigation regarding PTC’s share capital ownership. These
agreements were implemented on January 14, 2011, the date on which all proceedings among the parties were annulled. Vivendi relinquished all its rights to the PTC’s
shares and received €1.254 billion.
Compañía de Aguas de Aconquija and Vivendi against the Republic of Argentina
On August 20, 2007, the International Center for Settlement of Investment Disputes (“ICSID”) issued an arbitration award in favor of Vivendi and Compañia de Aguas de
Aconquija, its Argentinian subsidiary, relating to a dispute that arose in 1996 regarding the water concession it held between 1995 and 1997, in the Argentinian Province
of Tucuman. The arbitration award held that the actions of the provincial authorities had infringed the rights of Vivendi and its subsidiary, and were in breach of the
provisions of the Franco-Argentine Bilateral Investment Protection Treaty. The arbitration tribunal awarded Vivendi and its subsidiary damages of US$105 million plus
interest and costs.
On December 13, 2007, the Argentinian Government filed an application to vacate the arbitration award on the basis, among others, of an alleged conflict of interest
regarding one of the arbitrators. The ICSID appointed an ad hoc committee to rule on this application.
On August 10, 2010, the ICSID rejected the Argentinian Government’s application and the award of August 20, 2007 became final. As of the date of this Report, the
Argentinian Government has failed to comply with the award.
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Claim by Centenary Holdings III Ltd.
Centenary Holdings III Ltd. (CH III), a former Seagram subsidiary, divested in January 2004, was placed into liquidation in July 2005. On January 9, 2009, the liquidator
of CHIII sued a number of its former directors, former auditors and Vivendi. The liquidator, acting on behalf of CH III’s creditors, alleges that the defendants breached
their fiduciary duties.
On September 30, 2010, Vivendi and one of the former directors of CHIII settled with the liquidator. This settlement put an end to the legal proceedings brought
against them and assigned to Vivendi all claims filed on behalf of the creditors.
Vivendi Deutschland against FIG
Further to a claim filed by CGIS BIM (a subsidiary of Vivendi) against FIG to obtain the release of a portion of the amount remaining due pursuant to a buildings sale
contract, FIG obtained, on May 29, 2008, the cancellation of the sale by a judgment of the Berlin Court of Appeal, which invalidated a judgment rendered by the Berlin
High Court. CGIS BIM was ordered to repurchase the buildings and to pay damages in an amount to be determined. Vivendi delivered a guarantee so as to pursue
settlement negotiations. As no settlement was reached, on September 3, 2008, CGIS BIM challenged the validity of the judgment execution.
On April 23, 2009, the Regional Berlin Court issued a decision setting aside the judgment of the Berlin Court of Appeal dated May 29, 2008. On June 12, 2009, FIG
appealed that decision. A second claim for additional damages was filed by FIG in the Berlin Regional Court and was served on CGIS on March 3, 2009. On December
16, 2010, the Berlin Court of Appeal rejected FIG’s appeal and confirmed the decision of the Regional Berlin Court, which decided in CGIS’s favor and confirmed the
invalidity of the judgment execution and therefore invalidated the order for CGIS BIM to repurchase the building and pay damages.
Neuf Cegetel’s claim against France Télécom regarding the broadcasting of the Orange Foot channel
On May 14, 2009, the Paris Court of Appeal reversed a judgment that had upheld the claims made by Free and Neuf Cegetel against France Télécom relating to
the broadcasting of the Orange Foot channel, and held that the Orange Foot channel offer, which made subscription to the Orange Foot channel conditional upon
prior subscription to the Internet Orange ADSL offer, constituted a related sale transaction prohibited by the French Code of Consumption. The Court of Appeal
considered that the prohibition against related sale transactions was contrary to the regime established by the European Directive 2005/29/EC of May 11, 2005
concerning unfair business-to-consumer commercial practices. SFR appealed the decision to the French Supreme Court. On July 13, 2010, the French Supreme Court
rejected SFR’s appeal.
French Competition Council – mobile telephone market
On April 10, 2009, SFR appealed before the French Supreme Court the decision of the Paris Court of Appeal dated March 11, 2009, which had confirmed the financial
penalties imposed on the three operators for having entered into an illegal agreement and exchanged information between 1997 and 2003. On April 7, 2010, the
French Supreme Court confirmed the decision of the Paris Court of Appeal dated March 11, 2009, with respect to SFR.
Vivendi’s complaint against France Télécom before the European Commission for abuse of a dominant position
On March 2, 2009, Vivendi and Free jointly filed a complaint against France Télécom before the European Commission (the “Commission”), for abuse of a dominant
position. Vivendi and Free allege that France Télécom imposes excessive tariffs on offers for access to its fixed network and on telephone subscriptions. In July 2009,
Bouygues Telecom joined in this complaint. In a letter dated February 2, 2010, the Commission informed the parties of its intention to dismiss the complaint.
On September 17, 2010, Vivendi filed a complaint before the Court of First Instance of the European Union in Luxemburg.
Complaint against France Télécom before the French Competition Authority
On February 11, 2009, Neuf Cegetel and Groupe Canal+ jointly filed a complaint against France Télécom before the French Competition Authority for abuse of dominant
position and collusion with the French Professional Football League. Their complaint is that France Télécom uses a strategy intended to restrict the marketing of its
cinematographic and sporting rights to its exclusive ADSL subscribers only. The instructing magistrate issued a preliminary report on August 5, 2010, in which he
stated competition concerns and acknowledged France Télécom’s decision to propose certain commitments in response to those concerns. On September 20, 2010,
France Télécom sought an extension in order to prepare its response.
Complaint against France Télécom and Orange before the French Competition Authority
On August 9, 2010, SFR filed a complaint before the French Competition Authority against France Télécom and Orange for anti-competitive practices on the
professional mobile market.
Tenor against Groupe SFR Cegetel, Groupe France Télécom and Bouygues Telecom
Tenor (a fixed operators association, which became ETNA) brought a claim before the French Competition Council alleging anti-competitive practices by France
Télécom, Cegetel, SFR and Bouygues Telecom in the telecommunications sector. On October 14, 2004, the French Competition Council fined SFR, among others, for
abuse of dominant position. On November 20, 2004, SFR filed an appeal. On April 12, 2004, the Court of Appeal overturned the decision of the Competition Council,
having decided that the allegations were not proven. On April 29, 2005, ETNA appealed against that ruling before the French Supreme Court. On May 10, 2006, the
Supreme Court overruled the decision of the Court of Appeal stating that the Court of Appeal should have examined whether the alleged practices had an adverse
impact on competition. On April 2, 2008, the second Court of Appeal denied the requests made by SFR. On April 30, 2008, SFR appealed to the Supreme Court.
On March 3, 2009, the Supreme Court reversed the decision dated April 2, 2008, considering that “price scissoring” practices may not, as such, constitute anticompetitive practices.
On January 27, 2011, The Court of Appeal overruled the decision of the Competition Council stating that the grievances against SFR and France Télécom have not been
proven. The Court ordered the amount of the fine imposed by the Competition Council to be reimbursed.
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Complaint lodged with the Competition Authority by Orange Réunion, Orange Mayotte and Outre Mer Telecom against Société Réunionnaise
du Radiotéléphone (SRR)
Orange Réunion and Orange Mayotte filed a complaint against SRR (a SFR subsidiary) for alleged discriminatory practices. On September 15, 2009, the French
Competition Authority imposed protective measures on SRR, requiring it to propose to its subscribers offers which do not discriminate based on the network used,
except to reflect the cost differences among the network operators. The French Competition Authority’s investigation is ongoing.
Complaint lodged with the Competition Authority by Outre Mer Télécom against Société Réunionnaise du Radiotéléphone (SRR),
France Télécom and Mauritius Telecom
On September 23, 2010, Outre-mer Télécom filed a complaint before the French Competition Authority and sought protective measures. It alleges that SRR, France
Télécom and Mauritius Telecom have entered into an illegal framework agreement relating to the submarine cable project, LION, in the Indian Ocean.
Complaint of Bouygues Telecom against SFR and Orange in connection with the call termination and mobile markets
Bouygues Telecom brought a claim before the French Competition Council against SFR and Orange for certain alleged unfair trading practices in the call termination
and mobile markets (“price scissoring”). On May 15, 2009, the French Competition Authority resolved to postpone its decision on the issue and remanded the case for
further investigation. On December 13, 2010, SFR was heard on these allegations by the instructing magistrate.
Metro Goldwyn Mayer against Groupe Canal+ and others
In 1996, the TPS Group (TPS) entered into an output agreement with Metro Goldwyn Mayer Inc. (MGM), relating to the broadcasting rights of MGM’s catalog.
This agreement had an initial term of five years and was thereafter renewed for an additional five-year period before being terminated on December 31, 2006.
The agreement provided MGM with the right to renew the contract for a new five-year period if TPS merged with another satellite operator before the termination
of the agreement. Following the announcement of the merger between TPS and Canal+ France, MGM notified TPS that it would exercise its renewal option and
extend the agreement through December 31, 2011. TPS challenged this renewal based on the fact that the merger effectively occurred in January 2007, after the
termination of the agreement. In April 2007, MGM filed a complaint against Canal+France, Canal+ Distribution SAS, as successor to TPS, and Groupe Canal+, with
the District Court of New York seeking, among other things, damages for breach of contract. Discovery as well as witness depositions are ongoing and are not
expected to be completed before the end of June 2011.
Parabole Réunion affairs
In July 2007, the group Parabole Réunion filed a legal action before the Paris Tribunal of First Instance following the termination of the distribution on an exclusive
basis of the TPS channels in Reunion Island, Mayotte, Madagascar and Mauritius. Pursuant to a decision dated September 18, 2007, the Canal+ Group was prohibited,
under fine, from allowing the broadcast of these channels by third parties, unless it offered to Parabole Réunion the replacement of these channels by other similarly
attractive channels, to be distributed on an exclusive basis. Groupe Canal+ appealed this decision. In a ruling dated June 19, 2008, the Paris Court of Appeal reversed
the judgment and dismissed Parabole Réunion’s main claims against Groupe Canal+. On September 19, 2008, Parabole Réunion appealed to the French Supreme Court.
On November 10, 2009, the French Supreme Court dismissed the appeal brought by Parabole Réunion.
In parallel with the foregoing proceedings, on October 21, 2008, Parabole Réunion and its shareholders filed a claim against Canal Réunion, Canal+ Overseas,
CanalSatellite Réunion, Canal+ France, Groupe Canal+ and Canal+ Distribution, seeking the enforcement of the agreement entered into on May 30, 2008, pursuant to
the companies would combine their TV channel broadcasting activities in the Indian Ocean. The execution of this agreement was contingent upon the satisfaction of
certain conditions. As these conditions were not satisfied, the agreement became null and void. On June 15, 2009, the Commercial Court rejected Parabole Reunion’s
claim. Parabole Réunion appealed the decision.
Parabole Réunion also brought various proceedings seeking to obtain a statement recognizing the maintaining of the TPS Foot channel, among others, before the High
Court of Nanterre. On September 16, 2010, the Versailles Court of appeal rejected Parabole Réunion demands. Parabole Réunion appealed the decision before the
French Supreme Court.
Action brought by the French Competition Authority regarding practices in the pay-TV sector
On January 9, 2009, further to its voluntary investigation and a complaint by France Télécom, the French Competition Authority sent Vivendi and Groupe Canal+
a notification of grievances. It alleges that Groupe Canal+ has abused its dominant position in certain pay-TV markets and that Vivendi and Groupe Canal+ colluded
with TF1 and M6 on the one hand, and with Lagardère, on the other. Vivendi and Groupe Canal+ denied these allegations.
On November 16, 2010, the Competition Authority rendered a decision in which it dismissed the grievance of collusion, in respect of all parties and other grievances in
respect of Groupe Canal+. The Competition Authority requested further investigation regarding fiber optic TV and catch-up TV, Groupe Canal+’s exclusive distribution
rights on channels broadcasted by the group and by independent channels as well as the extension of exclusive rights on TF1, M6 and Lagardère channels to fiber optic
and catch-up TV. On December 17, 2010, France Télécom appealed the decision before the Paris Court of Appeal. Vivendi and Groupe Canal+ joined these proceedings.
Inquiry into the implementation of certain undertakings given in connection with the combination of Canal Satellite and TPS
The French Competition Authority opened an inquiry regarding the implementation of certain undertakings given by Vivendi and Group Canal+ in connection with the
combination of TPS and Canal Satellite. The investigation by the Competition Authority is ongoing.
267
Complaints against music industry majors in the United States
Several complaints have been filed before the Federal Courts in New York and California against Universal Music Group, Warner Music, EMI, Bertelsmann and Sony
BMG, for alleged anti-competitive practices in the context of sales of CDs and Internet music downloads. These complaints have been consolidated before the Federal
Court in New York. The motion to dismiss filed by the defendants was granted by the Federal Court, on October 9, 2008, but this decision was reversed by the Second
Circuit Court of Appeals on January 13, 2010. Defendants filed a motion for rehearing which was denied. They filed a petition with the U.S. Supreme Court which was
rejected on January 10, 2011.
Studio Infinity Ward, subsidiary of Activision Blizzard
After concluding an internal human resources inquiry into breaches of contract and insubordination by two senior employees at Infinity Ward, Activision Blizzard
terminated the employment of Jason West and Vince Zampella on March 1, 2010. On March 3, 2010, West and Zampella filed a complaint against Activision Blizzard
in Los Angeles Superior Court for breach of contract and wrongful termination. On April 9, 2010, Activision Blizzard filed a cross complaint against West and Zampella,
asserting claims for breach of contract and fiduciary duty. In addition, 38 current and former employees of Infinity Ward filed a complaint against Activision Blizzard
in Los Angeles Superior Court on April 27, 2010 for breach of contract and violation of the Labor Code of the State of California. On July 8, 2010, an amended complaint
was filed which added seven additional plaintiffs. They claim that the company failed to pay bonuses and other compensation allegedly owed to them.
On December 21, 2010, Activision Blizzard filed a consolidated cross complaint in order to add Electronic Arts as a party, the discovery having shown the complicity
of Electronic Arts in the case. The Court set a trial date of May 23, 2011. Activision Blizzard does not expect these two lawsuits to have a material impact on
the company.
Investigations in Brazil
On November 13, 2009, following Vivendi’s acquisition of Global Village Telecom (Holding) S.A. (“GVT”), the CVM (the Brazilian financial markets authority) and the
Public Prosecutors of the State of Rio and of the State of Parana opened an investigation regarding the information provided by Vivendi about transactions it carried
out with certain GVT shareholders.
On May 17, 2010, Vivendi received a statement of grievance from the CVM to which it responded on September 27, 2010. The CVM complains that Vivendi did not
provide sufficient information concerning certain option agreements entered into between Vivendi and a third party in its press release dated November 13, 2009,
announcing the acquisition of control of GVT. Vivendi opposed the statement.
In December 2010, Vivendi reached a settlement with the CVM, for an amount of approximately €67 million. This puts an end to the proceedings with the CVM.
As stated under Brazilian law, this settlement does not imply the acknowledgement of any wrongdoing by Vivendi in the context of GVT’s acquisition, nor a
determination by the CVM of any violation of the Brazilian Stock Exchange regulations by Vivendi.
Actions related to the ICMS tax
GVT is party in various Brazilian States to several proceedings concerning the recovery of the “ICMS” tax (Impostos Sobre Circulaçãos de Mercadorias e Prestaçãos de
Serviços), a tax on operations relating to the circulation of goods and the supply of transport, communication and electricity services. As of today, GVT has obtained
favorable decisions in several States.
Action related to the FUST and FUNTTEL taxes in Brazil
The Brazilian tax authorities argue that the assessment of the taxes known as “FUST” (Fundo da Universalizaçãos dos Serviços de Telecomunicaçõs), a federal tax to
promote the supply of telecommunications services throughout the whole Brazilian territory, including in areas that are not economically viable and “FUNTTEL”
(Fundo para Desenvolvimento Tecnológioco das Telecomunicações), a federal tax to finance technological investments in Brazilian telecommunications services should
be based on the company’s gross revenue without deduction for price reductions or interconnection expenses and other taxes, which would lead to part of that
sum being subject to double taxation. GVT is challenging this interpretation and has secured a suspension of payment of the sums claimed by the tax authority from
the federal judge.
Proceedings brought against telecommunications operators in Brazil regarding the application of the PIS and COFINS taxes
Several proceedings were launched against all the Brazilian telecommunications operators including GVT, with a view to preventing invoices from being increased by
taxes known as “PIS” (Programa de Integraçãos Social) and “COFINS” (Contribuição para Financiamento da Seguridade Social), which are federal taxes applying in
particular to revenue from the provision of telecommunications services. GVT believes that its defenses are stronger than those of the historic operators insofar as it
has a more flexible license that allows it to set its own tariffs.
268
Note 28. Major consolidated entities or entities accounted under equity method
As of December 31, 2010, approximately 530 entities were consolidated or accounted for using the equity method (compared to approximately 560 entities as of
December 31, 2009).
C: Consolidated; E: Equity.
December 31, 2010
Note
Vivendi S.A.
Activision Blizzard, Inc. (a)
Activision Publishing, Inc
Activision U.K. Ltd.
Guitar Hero, Inc
Blizzard Entertainment, Inc
Blizzard Entertainment S.A.S.
Universal Music Group, Inc.
PolyGram Holding, Inc.
UMG Recordings, Inc.
Vevo
SIG 104 (b)
Centenary Holding B.V.
Universal International Music B.V.
Centenary Music International B.V.
Universal Entertainment GmbH
Universal Music LLC
Universal Music France S.A.S.
Universal Music Holdings Limited
Centenary Music Holdings Limited
SFR Société Française du
Radiotéléphone S.A. (c)
Société Réunionnaise du Radiotéléphone S.C.S.
Société Financière de Distribution S.A.
5 sur 5 S.A.
Maroc Telecom S.A.
Mauritel S.A.
Onatel S.A.
Gabon Telecom S.A.
Sotelma S.A.
Global Village Telecom (Holding) S.A.
Global Village Telecom Ltda
POP Internet Ltda
Innoweb Ltda
Canal+ Group S.A.
Canal+ France S.A.
Canal+ S.A. (d)
MultiThématiques S.A.S.
TPS Star S.N.C.
Canal+ Overseas S.A.S.
Canal+ Distribution S.A.S.
StudioCanal S.A.
Cyfra+
Vietnam (e)
NBC Universal
Other
Polska Telefonia Cyfrowa (PTC) (f)
Vivendi Mobile Entertainment
18
2.3
2.1
18
30
2.2
2.4
Voting
Interest
December 31, 2009
Country
Accounting
Method
France
United States
United States
United Kingdom
United States
United States
France
United States
United States
United States
United States
France
Netherlands
Netherlands
Netherlands
Germany
Japan
France
United Kingdom
United Kingdom
C
C
C
C
C
C
C
C
C
E
C
C
C
C
C
C
C
-
France
France
France
France
Morocco
Mauritania
Burkina Faso
Gabon
Mali
Brazil
Brazil
Brazil
Brazil
France
France
France
France
France
France
France
France
Poland
Vietnam
United States
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
E
56%
100%
100%
100%
53%
51%
51%
51%
51%
100%
100%
100%
100%
100%
80%
49%
100%
100%
100%
100%
100%
75%
49%
12%
56%
56%
56%
56%
53%
22%
27%
27%
27%
100%
100%
100%
100%
100%
80%
39%
80%
80%
80%
80%
100%
75%
49%
12%
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
C
E
56%
100%
100%
100%
53%
51%
51%
51%
51%
82%
100%
100%
100%
100%
75%
49%
100%
100%
100%
100%
100%
75%
49%
20%
56%
56%
56%
56%
53%
22%
27%
27%
27%
82%
82%
82%
82%
100%
75%
36%
75%
75%
75%
75%
100%
75%
49%
20%
Poland
Poland
France
C
C
51%
100%
51%
100%
C
C
51%
100%
51%
100%
Parent company
52%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
-
Ownership
Interest
Accounting
Method
61%
61%
61%
61%
61%
61%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
-
C
C
C
C
C
C
C
C
C
E
C
C
C
C
C
C
C
C
Voting
Interest
Parent company
53%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
Ownership
Interest
57%
57%
57%
57%
57%
57%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
269
(a) Vivendi consolidates Activision Blizzard and its subsidiaries because it holds the right to appoint a majority of members to Activision Blizzard’s board of
directors and thus has the power to govern Activision Blizzard’s financial and operational policies in order to obtain benefits from its operations. Until
2013, the approval of certain matters by Activision Blizzard board of directors requires the affirmative vote of a majority of the votes present or otherwise
able to be cast on the board and at least a majority of the independent directors of the board. However, until 2013, the distribution of any dividend by
Activision Blizzard requires the affirmative vote of a majority of the independent directors if Activision Blizzard’s pro forma net debt, after giving effect to
such dividend, exceeds $400 million.
Moreover, due to Activision Blizzard’s stock repurchase program, the exercise of stock options, restricted stocks and other dilutive instruments by
Activision’s employees, Vivendi’s ownership interest in Activision Blizzard may fluctuate from time to time.
(b) In October 2010, SIG 104 acquired Centenary Holding BV, in connection with an intergroup transfer of UMG‘s non-American subsidiaries.
(c) SFR S.A. is 56% owned by Vivendi and 44% owned by Vodafone. Under the terms of the shareholders’ agreement, Vivendi has management control of
SFR, majority control over the board of directors, appoints the chairman and CEO, has majority control over shareholders’ general meetings, and no other
shareholder or shareholder group is in a position to exercise substantive participating rights that would allow them to veto or block decisions taken by
Vivendi.
(d) This company is consolidated because (i) Vivendi has majority control over the board of directors, (ii) no other shareholder or shareholder group is in a
position to exercise substantive participating rights that would allow them to veto or block decisions taken by Vivendi and (iii) Vivendi assumes the
majority of risks and benefits pursuant to an agreement with Canal+ S.A. via Canal+ Distribution S.A.S., as amended on December 28, 2007. Indeed,
Canal+ Distribution, a wholly-owned subsidiary of Vivendi, guarantees Canal+ S.A. results in return for exclusive commercial rights to the Canal+ S.A.
subscriber base.
(e) In 2009, Canal+ Group and VTV, the Vietnamese public television company, launched a satellite pay-TV platform in Vietnam. The entity is held 49% by
Canal+ Group and 51% by VCTV, a VTV subsidiary. This company has been fully consolidated since July 1, 2009 by Vivendi because Canal+ Group has both
operational and financial control due to a general delegation granted by the majority shareholder as well as due to the bylaws of this company.
(f) Due to the litigations which opposed Vivendi and its subsidiary Elektrim Telekomunikacja (Telco) against Deutsche Telekom and Elektrim SA (Elektrim), the
legal uncertainty regarding the ownership of Telco’s stake in a mobile telecommunication operator Polska Telefonia Cyfrowa (PTC) prevented Telco from
exercising joint control over PTC, as provided in the by-laws of PTC. As a result, Vivendi did not consolidate its stake in PTC, whose carrying value was
decreased to zero since the year ended December 31, 2006 (please refer to Note 2.4).
270
Note 29. Statutory auditors fees
Fees paid by Vivendi SA to its statutory auditors and members of their firms in 2010 and 2009 were as follows:
Statutory audit, certification, consolidated and individual
financial statements audit
Issuer
Fully consolidated subsidiaries
Other work and services directly related to the statutory audit
Issuer
Fully consolidated subsidiaries
Sub-total
Other services provided by the network to fully
consolidated subsidiaries
Legal, tax and social matters
Other
Sub-total
Total
Salustro Reydel
(Member of KPMG International)
Amount
Percentage
2010
2009
2010
2009
Amount
Percentage
2010
2009
2010
2009
Total
2010
2009
0.7
3.6
0.7
4.0
11%
56%
11%
61%
1.2
5.6
1.2
5.8
15%
72%
14%
66%
1.9
9.2
1.9
9.8
0.1
1.2
5.6
0.1
1.0
5.8
2%
19%
88%
2%
15%
89%
0.1
0.7
7.6
0.8
0.5
8.3
1%
9%
97%
9%
6%
95%
0.2
1.9
13.2
0.9
1.5
14.1
0.2
0.6
0.8
6.4
0.2
0.5
0.7
6.5
3%
9%
12%
100%
3%
8%
11%
100%
0.2
0.2
7.8
0.1
0.3
0.4
8.7
3%
3%
100%
1%
4%
5%
100%
0.2
0.8
1.0
14.2
0.3
0.8
1.1
15.2
Note 30. Subsequent events
The main developments that occurred between December 31, 2010 and February 22, 2011, the date of the Management Board meeting that approved the financial
statements for the fiscal year 2010 are as follows:
• End to the litigation in Poland: on January 14, 2011, completion of the agreements entered into in December 2010 and receipt of net cash proceeds of
€1,254 million by Vivendi (please refer to Note 2.4);
• On January 19, 2011, Canal+ Group and Orange announced their intention to create a joint-venture in order to merge Orange Cinema Series and TPS Star;
• Completion of the sale of Vivendi’s interest in NBC Universal for $3,800 million received on January 25, 2011; Vivendi received a total amount of
$5,800 million (please refer to Note 2.2);
• New stock repurchase program under which Activision Blizzard can repurchase shares of its outstanding common stock up to an amount of $1.5 billion
(please refer to Note 18); and
• Securities Class Action in the United States (please refer to Note 27).
Section 1
Vivendi SA 2010 Statutory Financial Statements
1. Statutory Auditors’ Report on the Financial Statements
2. Statutory Financial Statements
Statement of Earnings
Statement of Financial Position
Statement of Cash Flows
3. Notes to the 2010 Statutory Financial Statements
Major Events of the Year
Note 1. Accounting Rules and Methods
Note 2. Operating Earnings/(Loss)
Note 3. Net Financial Income/(Loss)
Note 4. Net Exceptional Items
Note 5. Income Tax (Expense)/Credit
Note 6. Intangible Assets and Property, Plant and Equipment
Note 7. Long-term Investments
Note 8. Treasury Shares
Note 9. Current Assets
Note 10. Receivables Maturity Schedule
Note 11. Deferred Charges
Note 12. Unrealized Foreign Exchange Gains and Losses
Note 13 Equity
Note 14 Stock Subscription Option Plans and Restricted Stock Plans
Note 15. Provisions
Note 16. Borrowings
Note 17. Debt Maturity Schedule
Note 18. Items Impacting Several Account Headings of the Statement
of Financial Position
Note 19. Financial Income and Expenses Concerning Related Parties
Note 20. Compensation of Directors and Officers
Note 21. Management Share Ownership
Note 22. Number of Employees
Note 23. Financial Commitments and Contingent Liabilities
Note 24. Litigation
Note 25. Instruments Used to Manage Borrowings
Note 26. Foreign Currency Risk Management
Note 27. Fair Value of Derivative Instruments
Note 28. Deferred Deductions for Taxes
Note 29. Subsequent Events
4. Subsidiaries and Affiliates
272
274
274
275
277
278
278
279
281
282
283
283
283
284
285
285
286
286
286
286
287
288
289
290
290
291
291
291
291
291
294
297
298
299
299
299
300
Section 2
Maturity of Trade Accounts Payable
302
Section 3
Financial Results of the Last Five Years
302
Section 4
Statutory Auditor’s Report on related
party Agreements and Commitments
303
272
Section 1 Vivendi SA 2010 Statutory Financial Statements
1. Statutory Auditor’s Report on the Financial Statements
In compliance with the assignment entrusted to us by your annual general shareholders’ meetings, we hereby report to you for the year ended December 31, 2010 on:
• the audit of the accompanying financial statements of Vivendi S.A., hereinafter referred to as “the Company”;
• the justification of our assessments;
• the specific verifications and information required by law.
The financial statements have been approved by your management board. Our role is to express an opinion on the financial statements, based on our audit.
1. Opinion on the financial statements
We conducted our audit in accordance with the auditing standards generally accepted in France. Those standards require that we plan and perform the audit to obtain
reasonable assurance that the financial statements are free of material misstatement. An audit involves examining, on a test basis or by other sampling means,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit has provided us with sufficient
relevant information on which to base our opinion.
In our opinion, the financial statements give a true and fair view of the Company’s financial position and assets and liabilities as at December 31, 2010, and of the
results of its operations for the year then ended, in accordance with the accounting principles generally accepted in France.
Without qualifying our opinion, we draw your attention to Note 24 to the financial statements, which explains the change in estimate of the provision for the
Securities Class Action recognized as at December 31, 2010.
2. Justification of our assessments
Pursuant to the provisions of Article L. 823-9 of the French Commercial Code relating to the justification of our assessments, we draw your attention to the following
matters:
Accounting policies
Note 1 to the financial statements sets out the accounting policies and methods used to recognize equity interests and provisions. As part of our assessment of
the accounting policies implemented by your Company, we verified that the information presented in the notes to the financial statements was appropriate and
consistently applied.
Accounting estimates
Interests in equity affiliates
Note 1 to the financial statements states that your Company recognizes impairment losses when the carrying amount of its financial assets exceeds their book value.
Based on the information available at the date of this report, we assessed the approach adopted by your Company to determine book value and ensured that the
assumptions made and ensuing valuations were reasonable.
273
Vivendi Vivendi SA 2010 Statutory Financial Statements
Provisions for litigation
Note 24 to the financial statements describes the methods used to evaluate and recognize provisions for litigation. We assessed the methods used by your group
to list, calculate and account for such provisions. We also assessed the data and assumptions underlying the estimates made by the Company and obtained, where
appropriate, the estimates of independent experts commissioned by the Company. We also ensured that any uncertainties regarding estimates of provisions for
litigation were disclosed in Note 24 to the financial statements. Such disclosures were limited, in compliance with accounting standards, as they concern information
that might be detrimental to the Company. As stated in Note 1 to the financial statements, facts and circumstances may lead to changes in estimates and
assumptions which could have an impact upon the reported amount of the provisions.
Our assessments were an integral part of our audit of the financial statements taken as a whole, and therefore contributed to the formation of the opinion expressed
in the first part of this report.
3. Specific verifications and information
We also carried out the specific verifications required by law in accordance with the auditing standards applicable in France.
We have no matters to report regarding the fair presentation and conformity of the financial statements with the information provided in the management
report section of the 2010 Annual Report – Registration Statement and in the documents addressed to shareholders with respect to the financial position
and financial statements.
With regard to the financial information disclosed pursuant to Article L.225-102-1 of the Commercial Code on the remuneration and benefits paid to company
executives and on the commitments made to them, we checked that the information was consistent with the financial statements or with the data used to prepare
the financial statements, and where appropriate, with the information collected by your Company from companies that either control or are controlled by your
Company. On the basis of this work, we found that the information was accurate and fairly presented.
In accordance with French law, we have ascertained that the information relating to the acquisition of shares and controlling interests and the identity of
shareholders has been disclosed in the 2010 Annual Report – Registration Statement.
Paris-La Défense and Neuilly-sur-Seine, February 28, 2011
Salustro Reydel
Frédéric Quélin
Jean-Yves Jégourel
274
2. 2010 Statutory Financial Statements
I. Statement of Earnings
Operating income
Total revenues
Reversal of provisions and expense reclassifications
Other income
Total I
Operating expenses
Other purchases and external charges
Duties and taxes other than income tax
Wages and salaries
Social security contributions
Depreciation, amortization and charges to provisions
On intangible assets and PP&E: amortization and depreciation
On current assets: charges to provisions
For contingencies and losses: charges to provisions
Other expenses
Total II
Loss from operations (I-II)
Financial income
From subsidiaries and affiliates
From other securities and long-term receivables
Other interest and similar income
Reversal of provisions and expense reclassifications
Foreign exchange gains
Net proceeds from the sale of marketable securities
Total III
Financial expenses
Amortization and charges to financial provisions
Interest and similar charges
Foreign exchange losses
Net expenses related to the sale of marketable securities
Total IV
Net financial income / (loss) (III-IV)
Earnings/(Loss) from ordinary operations before tax (I-II + III-IV)
Exceptional income
From non-capital transactions
From capital transactions
Reversals of provisions and expense reclassifications
Total V
Exceptional expenses
related to non-capital transactions
related to capital transactions
Exceptional depreciation, amortization and charges to provisions
Total VI
Net exceptional items (V-VI)
Employee profit-sharing (VII)
Income tax (credit) (VIII)
Total income (I + III + V + VIII)
Total expenses (II + IV + VI + VII)
Earnings/(Loss) for the year
Note
2010
2009
2
2
92.0
5.7
1.0
98.7
93.1
29.0
0.6
122.7
2
2
104.9
5.2
36.4
16.2
175.1
6.2
35.1
14.8
6.1
6.3
4.1
1.1
174.0
(75.3)
1.4
1.6
240.5
(117.8)
828.6
178.7
230.7
640.9
1,715.2
0.4
3,594.5
1,338.5
193.6
118.5
180.9
1,483.7
1.4
3,316.6
54.4
383.5
1,696.8
2,134.7
1,459.8
1,384.5
1,102.7
446.8
1,473.3
0.3
3,023.1
293.5
175.7
20.1
182.3
1,551.4
1,753.8
3.0
835.4
249.2
1,087.6
176.5
1,340.7
3.3
1,520.5
233.3
10.4
1,015.3
561.3
1,587.0
(499.4)
658.9
6,105.9
3,829.2
2,276.7
199.0
4,725.9
4,850.6
(124.7)
3
4
5
275
II. Statement of Financial Position
Non-current assets
Intangible assets
Long-term investments (a)
Investments in affiliates and Long-term portfolio securities
Loans to subsidiaries and affiliates
Other long-term investment securities
Loans
Other
Total I
Current assets
Inventories and WIP
Receivables (b)
Trade accounts receivable and related accounts
Other receivables
Marketable securities
Treasury shares
Other securities
Cash at bank and in hand
Prepayments (b)
Total II
Deferred charges (III)
Unrealized foreign exchange losses (IV)
Total assets (I + II + III + IV)
(a) Portion due in less than one year
(b) Portion due in more than one year
Net
Note
Gross
Depreciation, amortization
and provisions
6
6
7
14.6
58.8
43,075.1
37,116.6
5,856.5
94.7
13.9
56.1
3,892.9
2,764.9
1,033.7
94.3
0.7
2.7
39,182.2
34,351.7
4,822.8
0.4
0.7
3.0
38,151.3
34,455.7
3,640.9
1.0
7.3
43,148.5
3,962.9
7.3
39,185.6
53.7
38,155.0
3,830.9
13.8
3,817.1
571.1
1.9
569.2
226.5
78.0
4,706.5
14.9
161.6
44,068.6
33.6
20.2
3,561.1
33.6
3,527.5
210.0
1.9
208.1
104.4
43.3
3,918.8
14.9
77.6
42,166.3
2,620.1
49.3
12/31/2010
12/31/2009
9
8
11
12
3,917.7
13.8
3,903.9
571.1
1.9
569.2
226.5
78.0
4,793.3
14.9
161.6
48,118.3
86.8
86.8
0.0
86.8
4,049.7
276
EQUITY AND LIABILITIES (in millions of euros)
Equity
Share capital
Additional paid-in capital
Reserves
Legal reserve
Other reserves
Retained earnings
Net equity
Tax-driven provisions
Total I
Provisions
Total II
Liabilities (a)
Convertible and other bond issues
Bank borrowings (b)
Other borrowings
Trade accounts payable and related accounts
Tax and employee-related liabilities
Amounts payable in respect of PP&E and related accounts
Other liabilities
Deferred income
Total III
Unrealized foreign exchange gains (IV)
Total equity and liabilities (I + II + III + IV)
(a) Portion due in more than one year
Portion due in less than one year
(b) Includes current bank facilities and overdrafts.
Note
12/31/2010
12/31/2009
13
15
16
16
16
12
6,805.4
12,942.1
6,758.7
12,874.2
640.6
9,480.2
2,276.7
32,145.0
640.6
11,210.0
118.3
(124.7)
31,477.1
32,145.0
191.3
191.3
31,477.1
714.4
714.4
6,017.3
1,735.6
3,650.5
27.8
29.8
1.8
76.8
6.2
11,545.8
186.5
44,068.6
7,225.6
4,320.2
128.5
6,076.6
1,362.8
2,144.6
55.7
28.4
70.2
153.5
8.5
9,900.3
74.5
42,166.3
5,758.1
4,142.2
118.6
277
III. Statement of Cash Flows
Elimination of non-cash income and expenses
Charges to depreciation and amortization
Charges to provisions net of (reversals)
Operating
Financial
Exceptional
Capital (gains) & losses
Other income and charges without cash impact
Operating cash flows before changes in working capital
Changes in working capital
Capital expenditure
Purchases of investments in affiliates and securities
Increase in loans to subsidiaries and affiliates
Receivables related to the sale of non-current assets and other financial receivables
Proceeds from sales of intangible assets and PP&E
Proceeds from sales of investments in affiliates and securities and repayments of contributions
Decrease in loans to subsidiaries and affiliates
Increase in deferred charges relating to financial instruments
Net cash provided by/(used in) investing activities
Net proceeds from issuance of shares
Dividends paid
New long-term borrowings secured
Principal payments on long-term borrowings
Increase (decrease) in short-term borrowings
Change in net current accounts
Treasury shares
Net cash provided by/(used in) financing activities
Change in cash
Opening net cash (a)
Closing net cash (a)
(a) Cash and marketable securities net of impairment (excluding treasury shares).
2010
2009
2,276.7
(124.7)
6.1
6.2
3.9
(583.8)
(1,548.1)
1,166.6
21.2
1,342.6
(527.9)
814.7
(0.9)
(3,175.1)
(2,120.8)
54.1
0.1
3,622.0
1,000.0
(5.6)
(626.2)
112.3
(1,721.0)
2,761.6
(1,386.5)
70.5
457.8
1.4
922.5
312.1
192.6
2,387.6
1,821.5
(7.9)
(248.8)
70.1
(734.8)
3,198.4
(2,055.7)
204.8
(1,493.1)
294.7
483.2
312.5
795.7
(810.3)
106.6
205.9
312.5
1,310.1
(144.4)
1,165.7
(0.6)
(3,724.1)
(693.2)
(32.1)
278
3. Notes to the 2010 Statutory Financial Statements
Preliminary comment: dollar amounts are expressed in US dollars and dirham amounts are expressed in Moroccan dirhams.
Major Events of the Year
In 2010, the major transactions were as follows:
Completion of the acquisition of GVT (Holding) S.A. in Brazil
On November 13, 2009, Vivendi took over GVT (Holding) S.A. (GVT). As of December 31, 2009, Vivendi held an 82.45% controlling interest in GVT representing a total
investment of €2,467 million.
In 2010, Vivendi obtained a 100% direct and indirect controlling interest in GVT following the acquisition of the 17.55% equity interest it did not hold in this company,
representing an additional direct and indirect cash payment of €517 million.
Sale of a 7.66% interest in NBC Universal
In December 2009, Vivendi agreed that it would sell its 20% interest in NBC Universal to General Electric (GE) (as amended, the “2009 Agreement”). The 2009
Agreement was entered into in connection with GE’s concurrent agreement with Comcast Corporation (“Comcast”) to form a new joint venture that would own
100% of NBC Universal and certain Comcast assets (the “Comcast Transaction”). Pursuant to the 2009 Agreement, Vivendi agreed to sell its 20% interest in NBC
Universal to GE for $5,800 million, in two transactions, the second of which was contingent upon the completion of the Comcast Transaction. On September 26, 2010,
Vivendi sold a 7.66% interest in NBC Universal to GE for $2,000 million. The remainder of Vivendi’s interest, or 12.34% of NBC Universal, was sold to GE on January
25, 2011, for $3,800 million (which includes an additional $222 million received in relation to the previously sold 7.66% interest), in advance of the closing of the
Comcast Transaction.
Agreement to end litigation over telecommunications assets in Poland
Due to the legal proceedings which opposed Vivendi and its subsidiary Elektrim Telekomunikacja (Telco) against Deutsche Telekom and Elektrim SA (Elektrim), the
legal uncertainty regarding the ownership of Telco’s stake in Polska Telefonia Cyfrowa (PTC), a mobile telecommunication operator, prevented Telco from exercising
joint control over PTC, in accordance with PTC’s by-laws. As a result, Vivendi decreased the carrying value of Telco to zero since the year ended December 31, 2006.
On December 14, 2010, Vivendi entered into certain agreements with Deutsche Telekom, Mr. Solorz-Zak (the main shareholder of Elektrim) and the creditors of
Elektrim, including the Republic of Poland and Law Debenture Trust Company (LDTC), as well as Elektrim’s bondholders (the “Bondholders”) in order to put an end to
the litigation regarding the ownership of PTC share capital.
The completion of the agreements was conditional upon Elektrim’s full exit from bankruptcy and upon the formal approval of the relevant documentation ending the
litigation by Elektrim after its exit from bankruptcy. In order to guarantee both the approval of these relevant agreements by Elektrim and the provision of the
documents necessary for the final completion of the agreements, Mr. Solorz-Zak granted to Vivendi, the Republic of Poland, and the Bondholders, a personal
guarantee of €675 million, counter-guaranteed by pledges on the interest held by Polaris Finance BV (a company controlled by Mr. Solorz-Zak) in Polsat Cyfrowy for
approximately 57% of its share capital.
On January 14, 2011, the date of final completion of the agreements, the guarantee expired and the pledges were raised. Moreover, as part of the agreements entered
into by and between LDTC, Vivendi and Deutsche Telekom, each of Vivendi and Deutsche Telekom have agreed to compensate LDTC up to a maximum of €50 million if
the latter were to exercise its pledge on Polstat Cyfrowy and were to recover an amount of less than €100 million. The agreements gave Vivendi and Deutsche
Telekom the option to exercise stock purchase options on Elektrim rather than paying the guaranteed amount, in the event that LDTC would call the guarantee. As
these agreements have been fulfilled, the proceedings among the parties were annulled at the final completion date of the agreements.
On January 14, 2011, the conditions precedent were satisfied and the agreements became effective. Under these agreements:
• Vivendi and Telco relinquished all of their rights to the PTC shares and put an end to all PTC related legal proceedings among the parties;
• Vivendi, Telco and VTI received aggregate net proceeds of €1,254 million (€1,195 million allocated to Vivendi SA), of which €600 million was from Deutsche
Telekom and €670 million from Elektrim, and Telco paid Elektrim approximately €16 million.
279
On January 29, 2010, the jury rendered its verdict in the Securities Class Action lawsuit in Federal Court in the State of New York. Following an assessment of this
verdict and all aspects of these proceedings, and using ad-hoc experts and in accordance with appropriate accounting principles, Vivendi recognized a €550 million
reserve as of December 31, 2009, with respect to the estimated damages, if any, that might be paid to the plaintiffs.
At a hearing that took place in New York on July 26, 2010, Vivendi petitioned the Court to apply the decision in the Morrison v. National Australia Bank case (the
“Morrison” decision) rendered by the US Supreme Court on June 24, 2010, and therefore to exclude from the class shareholders who did not purchase or sell their
shares on a US exchange.
Vivendi re-examined the amount of the reserve related to this litigation, given the decision rendered by the US District Court for the Southern District of New-York on
February 17, 2011 in our case, which followed the US Supreme Court’s decision on June 24, 2010 in the Morrison case. Using the same methodology and the same
valuation experts as in 2009, Vivendi re-examined the amount of the reserve and set it at €100 million as of December 31, 2010, in respect of the damages, if any, that
Vivendi might have to pay solely to shareholders who have purchased ADRs in the United States. Consequently, as of December 31, 2010, Vivendi recognized a €450
million reversal of reserve, compared to an accrual of €550 million as of December 31, 2009.
New borrowings and credit facilities set up / reimbursed by Vivendi SA
Please refer to Note 16, Borrowings.
Dividend paid with respect to fiscal year 2009
On April 29, 2010, Vivendi’s Annual Shareholders’ Meeting approved the recommendations of Vivendi’s Management Board relating to the allocation of distributable
earnings for fiscal year 2009. As a result, the dividend payment was set at €1.40 per share, representing a total distribution of €1,721 million, which was paid in cash
on May 11, 2010.
Note 1. Accounting Rules and Methods
General principles and change in accounting methods
The statutory financial statements for the year ended December 31, 2010 have been prepared and presented in accordance with applicable French laws
and regulations.
The accounting rules and methods that were applied for the preparation of these financial statements are identical to those applied for the preparation of the
2009 statutory financial statements.
Vivendi Management makes certain estimates and assumptions that it considers reasonable and realistic. Despite regular reviews of these estimates and assumptions,
based in particular on past or anticipated achievements, facts and circumstances may lead to changes in these estimates and assumptions which may have an impact
on the amount of assets, liabilities, equity or earnings recognized by the company. In particular, these estimates and assumptions relate to the measuring of asset
impairment (please refer to Note 7) and provisions (please refer to Note 15) as well as employee benefits (please refer to Note 1, Employee benefit plans).
Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are valued at acquisition cost.
Depreciation and amortization is calculated using the straight-line method and, where appropriate, the declining balance method over the actual period of use for the
relevant assets.
Long-term investments
Investments in affiliates and long-term portfolio securities
Investments in affiliates consist of investments in Vivendi Group affiliates in which Vivendi holds a significant interest, in principle more than 10%.
Long-term portfolio securities consist of securities held by Vivendi in companies which it expects will generate a reasonable medium and long-term return, without
involvement in their day-to-day management.
Investments in affiliates and long-term portfolio securities are valued at acquisition cost, including any potential impact as a result of the related hedging transactions.
If this value exceeds the value in use, an impairment loss is recorded for the difference between the two.
Value in use is defined as the value of the future economic benefits expected to be derived from the use of an asset. This is generally calculated by discounting the
future cash flows, although a more suitable method for each investment may be utilized, such as comparable stock market values, recent transaction values, stock
market prices for listed entities or proportionate share of net equity.
280
Vivendi expenses investment and security acquisition costs in the period during which they were incurred.
Loans to subsidiaries and affiliates
Loans to subsidiaries and affiliates consist of medium and long-term loans to Group companies. They do not include current account agreements with Group
subsidiaries used for the day-to-day management of cash surpluses and shortfalls. A provision is recorded to reflect non-recovery risks.
Treasury shares
All treasury shares held by Vivendi are recorded as Long-term Investments, with the exception of those purchased for sale to Group employees upon exercise of stock
purchase options which are recorded as marketable securities. Impairment losses are recorded, as applicable, to reduce the net book value of these shares to their
stock market value, based on the average closing share price during the month of December.
Operating receivables
Operating receivables are recorded at nominal value. A provision is, as applicable, recorded to reflect the risk of non-recovery.
Marketable securities
Marketable securities are recorded at acquisition cost. A provision is recorded if the estimated trading value at the end of the period is less than the acquisition cost.
Marketable securities include treasury shares purchased for sale to Group employees upon exercise of stock purchase options (please refer to Note 8, Treasury
shares). A provision is recorded if the gross value of these shares exceeds their expected sale price, based on the option exercise price.
Deferred charges relating to financial instruments
Loan issue costs and costs relating to the establishment of credit facilities are amortized equally over the term of such instruments.
Provisions
A provision is recorded where Vivendi has an obligation to a third party and it is probable or certain that an outflow of resources will be necessary to settle this
obligation, without receipt of an equivalent consideration from the third party.
The provision is equal to the best estimate, taken at period-end, of the outflow of resources necessary to settle the obligation, where the risk exists at the end
of the period.
The assumptions underlying the provision are regularly reviewed and any necessary adjustments are recorded.
Where a reliable estimate for the amount of the obligation cannot be made, a provision is not recorded and disclosure is made in the notes to the financial statements
(please refer to Note 24, Litigation).
Stock subscription option plans and restricted stock plans
When the company grants performance shares or sets up a stock purchase option plan that is settled by the delivery of treasury shares, a liability is recognized.
This liability is calculated based on the market price of Vivendi shares at grant date or the estimated share purchase price at year-end. In case of stock purchase
option plans, the entry cost or estimated share purchase price is reduced by the exercise price that is likely to be paid by employees. The disclosures required are
included in Note 14.
The provision recorded for obligations relating to employee benefit plans includes all Vivendi employee benefit plans, i.e., retirement termination payments, pensions
and supplemental pensions. It is calculated as the difference between the value of actuarial obligations and that of plan assets, net of actuarial gains and losses and
unrecognized past service costs.
The actuarial obligation is calculated using the projected unit credit method (each activity period generates additional entitlement). Actuarial gains and losses are
recognized using the corridor method set out in CNC Recommendation 03-R.01. This consists of recording, in the profit or loss account for the relevant period, the
amortization calculated by dividing the portion of actuarial gains and losses which exceeds the greater of 10% of (i) the obligation or (ii) the fair value of the plans
assets as of the beginning of the fiscal year, by the average remaining working life expectancy of the beneficiaries.
Foreign currency-denominated transactions
Foreign currency-denominated income and expense items are translated using average monthly rates.
Foreign currency-denominated receivables, payables, marketable securities and cash balances are translated at the closing date exchange rates.
Unrealized gains and losses on translation, using exchange rates at year-end, of foreign currency receivables and payables are recorded in the Statement of Financial
Position in Unrealized foreign exchange gains and losses. A provision for foreign exchange losses is recorded in respect of unhedged and unrealized exchange losses.
281
Foreign exchange gains and losses on cash balances and foreign currency current accounts are recorded immediately in foreign exchange gains and losses.
Financial instruments
Vivendi uses derivative financial instruments to (i) reduce its exposure to market risks associated with interest and foreign exchange rate fluctuations, and (ii) secure
the value of certain financial assets.
Where Vivendi has entered into hedge arrangements, income and expenses relating to the financial derivatives are recorded in Net Financial Income/(loss) and offset
against the income and expenses generated by the hedged items.
Unrealized capital gains on derivative instruments that do not qualify for hedge accounting are not recorded. Conversely, a provision is recorded in respect of
unrealized capital losses on these instruments.
Individual training entitlement
Pursuant to Opinion 2004 F of the Emergency Committee of the French National Accounting Board (CNC), Vivendi did not record a provision for individual training
entitlement at year-end 2010.
The company-wide agreement entered into in May 2006 provides for the allocation of 20 training hours each year thereafter (up to a maximum of 120 hours) to each
employee. At year-end 2010, a total of 20,540 training hours were not used.
Note 2. Operating Earnings/(Loss)
Revenues
Revenues by business segment are broken-down as follows:
2010
2009
Water
Services to subsidiaries
Total
2.5
89.5
92.0
5.3
87.8
93.1
Vivendi received revenues as a party to a residual water supply agreement, which expired on June 15, 2010. The operating entity under this agreement
was Veolia Eau.
Services that were provided by Vivendi to its subsidiaries consisted of assistance and domiciliation services, invoicing in respect of option plans and its rebilling
of expenses.
Operating expenses and expense reclassifications
In 2010, operating expenses amounted to €174.0 million, compared to €240.5 million in 2009.
Other purchases and external expenses net of reinvoicings, insurance repayments and expense reclassifications are broken-down as follows:
Purchases consumed
Rent
Insurance
Service providers, temporary staff and sub-contracting
Commissions and professional fees
Bank services
Other external services
Sub-total other purchases and external charges
Amounts rebilled to subsidiaries (other income)
Insurance repayments and expense reclassifications
Total net of rebilled expenses and repayments
2010
2009
0.7
7.6
10.5
8.5
52.8
5.8
19.0
104.9
(6.3)
(5.6)
93.0
0.7
8.0
13.7
9.0
115.8
8.1
19.8
175.1
(8.1)
(28.9)
138.1
Financial Report

2010 Annual Report

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