Vivendi, Europe’s largest telecoms and entertainment group, faces two difficult years as it wrestles with tougher competition in the French mobile market and does not expect earnings to grow again until 2014. The French company slashed its dividend on Thursday and predicted a drop in core profit of up to 15 per cent at its SFR telecom business, which has lost around 200,000 subscribers in the first two months of the year. SFR, Vivendi’s biggest unit, has been locked in a mobile price war since mid-January when Iliad’s Free Mobile shook up the French market with ultra low-cost offers. “The excessively favourable conditions granted to the new mobile operator by the regulator, the state and the incumbent operator, lead SFR to reconsider very carefully its commercial offers and its cost base,” Vivendi Chief Executive Jean-Bernard Levy said. The CEO said adjusted net profit would decline this year to more than 2.5 billion euros, down from a record 2.95 billion ($4 billion) last year. He added that 2013 would also be difficult, with profit growth set to resume only in 2014. Shares in Vivendi were 3.3 per cent lower in Frankfurt trading. The stock has fallen about 5 per cent this year. SFR has responded to Free with price cuts for a swathe of mobile offers and aggressive customer retention efforts. Rival Bouygues Telecom has said it is cutting costs to help offset an expected 10 per cent sales slide this year due in part to the increase in competition. France Telecom said last month it had lost 201,000 mobile customers, prompting it also to take a knife to its dividend, as well as putting off a share buyback promised for this year using proceeds from the sale of its Swiss unit. Instead it pledged to conserve cash in the face of tougher mobile competition and the euro zone debt crisis. Analysts predict Vivendi, France Telecom and Bouygues Telecom will become structurally less profitable as Iliad takes market share in the coming years, draining cash flows and eroding margins for the larger players. DIVIDEND CUT Vivendi said it would reduce the dividend paid to investors on last year’s results to 1 euro per share from an unchanged 1.40 euros a year ago, with shareholders also receiving one share for every 30 owned. Vivendi achieved a 9.4 per cent rise in adjusted net income in 2011, helped by its GVT Brazilian telecom and Activision Blizzard video game units. Earnings were also boosted as the group took full ownership of SFR after buying out partner Vodafone’s minority stake for about 8 billion euros. Vivendi had cut its profit forecast in November to more than 2.85 billion euros, against 3 billion previously, after the French government hiked corporate tax rates to help cut the national budget deficit, leading to 600 million of extra costs. The group warned on Thursday that in terms of higher taxes there were “potentially more to come in 2012”. Revenue inched 0.5 per cent higher last year to 28.8 billion euros. Activision Blizzard said on Wednesday it was cutting 600 jobs globally out of 7,300 in the unit that makes Internet games including the company’s most profitable property, “World of Warcraft”, which has lost users in recent quarters. Meanwhile, France Telecom, the owner of the Orange mobile-phone brand, cut its dividend forecast for this year by as much as 14 per cent as it predicts a decline in operating cash flow. The 2012 payout will be in a range of 1.21 euros to 1.35 euros a share, Chief Financial Officer Gervais Pellissier said on a conference call. The Paris-based company had predicted 1.40 euros in dividend. Operating cash flow will be about 8 billion euros ($10.6 billion) this year, declining from 9.3 billion euros in 2011. With one of the highest dividend yields in the telecommunications industry in Europe, the company has been under pressure to lower dividend. Telefonica SA reduced its dividend forecast in December. Earnings before interest, taxes, depreciation and amortization fell 3.9 per cent to 3.47 billion euros ($4.6 billion), the Paris-based company said today in an e-mailed statement. Sales slipped 2.6 per cent to 11.43 billion euros. Analysts had predicted Ebitda of 3.42 billion euros on sales of 11.38 billion euros, according to data compiled by Bloomberg.