Q1 financials in-line
VIV saw EBITA grow +14% on an underlying basis to €218m (vs cons €218m). Within
the mix, Canal+ was €13m light vs cons while UMG was +€14m ahead. Canal+ was
impacted by the dropping out of a one-off benefit from Q1-14 as well as programming
inflation. However, a strong release schedule and FX benefits helped boost UMG. The
y-o-y growth for VIV was driven by lower losses in Other given reduced losses from
operations such as Watchever (German OTT).
Tender offer for SECP (Canal+ SA)
VIV stated it would make a tender offer for the 51% of SECP (Canal+ SA) that it does
not own. SECP is the listed ‘shell’ company that holds the broadcasting licence for
Canal+ (VIV owns 100% of the operating assets) and the structure was originally put in
place given prior restrictions that limited ownership of broadcasting assets to <49% but
these restrictions were removed in 2009. VIV is offering €7.60 per SECP/Canal+ SA
share (+20% premium) and acquiring 51% will cost VIV around €0.5bn. Assuming all
shareholders tender, we estimate the deal will reduce the minority charge with a
limited cost of financing leading to low-single digit earnings accretion.
Guidance unchanged
VIV has retained its guidance of a slight increase in underlying revenue and stable
margin to give ~10% growth in adj. net income. VIV has also stated that the strong
Q1 performance at UMG should not be extrapolated and it is cautious ahead of the
launch of Apple’s new music streaming service later this year. We do not expect
significant changes to underlying cons estimates, but cons adj. net income could nudge
up marginally to reflect the SECP buyout.
Valuation: PT based on SOTP
Recent press reports suggested VIV was considering a range of M&A scenarios
(acquisition of Mediaset/increasing its stake in TI). In the end, Q1 results were relatively
uneventful, and VIV avoided any explicit comment on its interest in free-to-air assets
and whether it will increase its stake in TI.