Euro conglom makes plans to spend its war chest

Who said foreign companies never make a buck out of Hollywood?

By Sept. 26, France’s Vivendi, Europe’s biggest entertainment group, will draw down $2 billion from selling its 20% stake in NBC Universal to General Electric. If the Comcast-NBC U merger goes through, it gets a further $3.8 billion payday.

All its units — Universal Music Group, vidgame company Activision Blizzard, paybox Canal Plus Group, Gallic telco SFR and Morocco’s Maroc Telecom — delivered double-digit operating profit margins in 2009.

It’s a far cry from the bad old days10 years ago when then-CEO Jean-Marie Messier plunged Vivendi into debt by paying $42 billion for Seagram, including Universal Studios,

So what will Vivendi do with that huge war chest?

On March 1, Vivendi chairman-CEO Jean-Bernard Levy set out a strategic wish-list while reviewing the 2009 results.

Levy said growth will cut three-ways — innovation and organic growth; buying up minority interests in companies it already owns; and moving into “fast-growing regions and businesses.”

Much Vivendi growth looks set to turn around France and emerging markets. Many moves are already being made.

Vivendi is expanding digital services. In France, Canal Plus bowed the iPhone Canal Plus application in December, which was downloaded 500,000 times in its first month.

Canal Plus is also pushing Le Cube, an HD-capable, DVR decoder.

To grow revenues, Canal Plus “will have to spend more on customer support, marketing, and services such as HD and boxes,” says Christophe Cherblanc, at Societe Generale, the global banking and investment company.

If the price is right, says Levy, Vivendi “will acquire minority rights we do not yet hold in our French subsidiaries.” Levy has his eye on media and publishing company Lagardere’s 20% in Canal Plus Group and U.K. multinational cell phone giant Vodafone’s 44% in SFR.

“If Vivendi acquires 100% of SFR and Canal Plus Group, there might be a merger, creating a ‘French BSkyB,’ ” says Francois Godard, at Enders Analysis, referring to News Corp.’s pay TV platform.

Vivendi recently paid $4.18 billion for GVT, Brazil’s fastest-growing telco operator and will continue to look for possible acquisitions in fast-growing emerging markets, Levy says.

In June, it announced its first Asian service, a joint satellite TV venture with Vietnamese pubcaster VTV.

Canal Plus Group added 238,000 net French subscriptions and 259,000 from abroad, largely from Poland’s Cyfra Plus.

New expansion, however, is no slam dunk.

“The pole positions for mobile TV operators in emerging markets have been taken,” says Godard.

Some Vivendi growth is driven by old media tactics, such as Canal Plus France’s drive into original series production, most recently TV series “Braquo” and “Pigalle.” It’s the kind of high-budget fare that French free-to-air broadcasters can’t now afford.

In expansion, Vivendi has to display aggression and caution: quite a balancing act. The trigger-happy Messier acquisition days are over.

In recent years, Vivendi’s kicked the tires of Kuwaiti telco Zain, Spain’s pay TV service Digital Plus and France’s Yellow Pages. It passed.

Since 2002, “Vivendi’s track record has been much more disciplined than most people assume,” says Cherblanc, citing Vivendi Games’ 2008 merger with Activision, creating the world’s largest vidgame company, as a “brilliant deal.”

Vivendi needs that discipline — a post-bubble market won’t condone companies, even behemoths, throwing good money after bad.

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